The joint cost to produce Products 1A, 2A, 3A and 4A is $2,000. Each of these products
Question:
The joint cost to produce Products 1A, 2A, 3A and 4A is $2,000. Each of these products can either be sold at the end of the joint production process, or can be processed further into 1B, 2B, 3B and 4B.
Production and selling information is as follows:
Product Name | Product 1A | Product 2A | Product 3A | Product 4A |
Batch size (kg) | 30 | 20 | 6 | 4 |
Sales Value ($ per kg) | 100 | 50 | 2 | 1 |
| ||||
If further processed: | ||||
processed from: | Product 1A | Product 2A | Product 3A | Product 4A |
processed into: | Product 1B | Product 2B | Product 3B | Product 4B |
additional costs (in $) | 50 | 130 | 120 | 10 |
Final batch size (kg) | 29 | 15 | 6 | 6 |
Final Sales value ($/kg) | 120 | 200 | 100 | 6 |
For example, at the end of the joint production process, there are 30 kg of Product 1A produced, and each kg of Product 1A sells for $100/kg. The 30kg batch of Product 1A can either be sold at this point for $3,000 or the batch can be further processed into a batch of Product 1B at an additional cost of $50. This will produce a 29kg batch of Production 1B that sells for $120/kg.
Required:
Part A Assuming that none of the products are byproducts, calculate the how much of the $2,000 joint cost should be allocated to each product using the four methods discussed in class.
Part B How much of the $2,000 joint cost should be allocated to each product using the Net Realizable Value method if product 4 is a byproduct?
Fundamental Accounting Principles
ISBN: 978-0078110870
20th Edition
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta