Process costing; joint cost allocation; by-product GetAhead provides personal tr

Question

Process costing; joint cost allocation; by-product

GetAhead provides personal training services for, and sells apparel products to, its clients. GetAhead also generates some revenue from protein drink sales. The net realizable value from drink sales is accounted for as a reduction in the joint cost assigned to the Personal Training Services and Apparel Products. Protein drinks sell for $2.50 per bottle. The costs associated with making and packaging the drinks are $1.00 per bottle.

The following information is available for 2013 on apparel products, which are purchased by GetAhead:

Joint cost is to be allocated to Personal Training Services and Apparel Products based on approximated net realizable values. For 2013, total revenues were $753,000 from Personal Training Services and $289,000 from Apparel. The following joint costs were incurred:

Separate costs were as follows:

For the year, 2,500 bottles of protein drinks were sold.

a. What is the total net realizable value of protein drinks used to reduce the joint cost assigned to Personal Training and Apparel?
$

b. What is the joint cost to be allocated to Personal Training and Apparel?
$

c. What is the approximated pre-tax realizable value of each main product or service for 2013?

d. How much joint cost is allocated to each main product or service?

e. Determine the net income produced by each main product or service.

Explanation / Answer

NET REALIZABLE = TOTAL REVENUES - JOINT COSTS

   = (753000 + 289000) - (36000 + 43750 + 3000)

   = 1042000 - 82750

   = $959250

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