6. Products X and Y are manufactured in a joint process. The joint (common) cost

Question

6. Products X and Y are manufactured in a joint process. The joint (common) costs incurred are $420,000 for a standard production run that generates 180,000 gallons of Product X which sells for $2.40 per gallon and 120,000 gallons of Product Y which sells for $3.90 per gallon. If additional processing costs beyond the split-off point are $1.40 per gallon for Product X and $0.90 per gallon for Product Y, the amount of joint cost allocated to Product Y on a net realizable value basis is: (Points : 1)
a. $280,000.
b. $252,000.
c. $168,000.
d. $140,000.

Explanation / Answer

cost price per gallon of product X before split off point=2.40-1.40=$1 cost price per gallon of product Y before split off point=3.90-0.90=$3 product production cost price net realizable joint cost allocation X 180000 1 180000 (420000*180000/540000)140000 Y 120000 3 360000 (420000*360000/540000) 280000 the amount of joint cost allocated to Product Y is $280000

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