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Required:

From the information given below calculate the following:

1. Allocation of joint cost using sales vale method.
2. Allocation of joint cost using the net realisable value (NRV) method.

Canada Manufactures produces two types of food products from raw milk: full-cream and Half-cream milk. The two products share common or joint cost. In September 2020, the following information were recorded regarding the production and sales of the company:

Joint cost 275 000 liters of raw mild was produced for:	$1 000 000
Products:	Full-cream milk liters	Half-cream milk liters
Opening inventory Production Closing inventory Sales	0 62 500 50 000	0 187 500 75 000
Selling price per liter	$20	$10

Canada Manufacturers has the option of further production of the joint products into full-cream ice cream and half-cream ice cream. The following information is available for further production:

Joint cost 275 000 liters of raw milk was produced	$1 000 000		Full-cream Ice Cream	Half-cream Ice Cream
Separable processing cost			$700 000	$1 300 000
	Full-cream milk	Half-cream milk	Full-cream Ice Cream	Half-cream Ice Cream
Opening inventory Production in liters Transferred for further production Closing inventory Sales	0 62 500 62 500	0 187 500 187 500	0 50 000 20 000 30 000	0 125 000 12 500 112 500
Selling price per liter			$62.50	$55

Answer:

1.

Panel A: Allocation of joint cost using sales value at splitoff method	Full-cream milk	Half-cream milk	Total

Panel B: Product-line income statement	Full-cream milk	Half-cream milk	Total

2.

Panel A: Allocation of joint cost using net realisable value method	Full-cream Ice Cream	Half-cream Ice Cream	Total
Panel B: Product-line income statement	Full-cream Ice Cream	Half-cream Ice Cream	Total

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