Question: Deakin Chemical generates 4 solvents (B, C, D, and E) simultaneously from the joint production in Department A. In 2020, Department A consumes $56,000 direct
Deakin Chemical generates 4 solvents (B, C, D, and E) simultaneously from the joint production in Department A. In 2020, Department A consumes $56,000 direct material and $24,000 direct labour; the manufacturing overhead are $10,000. Solvent B is the by-product. The firm deducts the estimated NRV of by-product (net realizable value) from the joint cost of solvents C, D, and E. The following is the cost and revenue information for the output of Department A in 2020:
| Barrels | Sales price per barrel at split-off point | Further processing cost per barrel | Final sales price per barrel | |
| B | 500 | -- | $2.00 | $3.50 |
| C | 10,000 | $8.00 | -- | -- |
| D | 14,000 | $12.50 | $8.00 | $19.00 |
| E | 20,000 | $4.00 | -- | -- |
Currently, by-product solvent B requires further processing before it could be sold to customers. Solvents C and E can be sold directly at the split-off point, without further processing. Solvent D can be sold directly at the split-off point; alternatively, it could be processed further so that it could be sold to outside customers at a higher sales price. The further processing of solvent D requires 14,000 barrels of solvent F that can be purchased at $4.50 per barrel. The additional labour and overhead cost in the further processing are $3.50 for each barrel of Solvent D. Thus, the further processing cost of solvent D is $8.00 per barrel. The physical amount of Solvent D does not change in the further processing.
Required
- Calculate the joint cost to be allocated among solvents C, D, and E. (4 marks)
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