Townson Company manufactures G and H in a join process. The joint costs amount t
ID: 2396988 • Letter: T
Question
Townson Company manufactures G and H in a join process. The joint costs amount to $80,000 per batch of finished goods. Each batch yields 20,000 liters, of which 40% are G and 60% are H. The selling price of G is $8.76 per liter, and the selling price of H is $15.00 per liter.
Required:
A. If the joint costs are allocated on the basis of the products' sales value at the split-off point, what amount of joint cost will be charged to each product? Hint (Unit sales $/Total Sales) x Cost
B. Townson has discovered a new process by which G can be refined into Product GG, which has a sales price of $12 per liter. This additional processing would increase costs by $2.10 per liter. Assuming there are no other changes in costs, should the company use the new process? Show calculation
Explanation / Answer
Solution A:
Solution B:
As there is incremental benefits from further processing, therefore product G should be further processed in product GG.
Allocation of Joint Cost - Sale Value at Split off Point Particulars Product G Product H Total Output at split off point 8000 12000 Selling price at split off $8.76 $15.00 Sale Value at split off $70,080 $180,000 $250,080 Allocation of Joint Cost $22,418 $57,582 $80,000Related Questions
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