Lankip Company produces two main products and a by-product out of a joint proces
ID: 2469299 • Letter: L
Question
Lankip Company produces two main products and a by-product out of a joint process. The ratio of output quantities to input quantities of direct material used in the joint process remains consistent from month to month. Lankip has employed the physical-volume method to allocate joint production costs to the two main products. The net realizable value of the by-product is used to reduce the joint production costs before the joint costs are allocated to the main products. Data regarding Lankip's operations for the current month are presented in the chart below. During the month, Lankip incurred joint production costs of $2,690,000. The main products are not marketable at the split-off point and, thus, have to be processed further.
The amount of joint production cost that Lankip would allocate to the Second Main Product by using the physical quantities method to allocate joint production costs would be:
Lankip Company produces two main products and a by-product out of a joint process. The ratio of output quantities to input quantities of direct material used in the joint process remains consistent from month to month. Lankip has employed the physical-volume method to allocate joint production costs to the two main products. The net realizable value of the by-product is used to reduce the joint production costs before the joint costs are allocated to the main products. Data regarding Lankip's operations for the current month are presented in the chart below. During the month, Lankip incurred joint production costs of $2,690,000. The main products are not marketable at the split-off point and, thus, have to be processed further.
Explanation / Answer
Realisable value of by product=66,800*$3.7=$247,160
Total output other than by product=100,200+167,000=267,200
joint production costs after realisation of by product=$2,690,000-$247,160=$2,442,840
so
he amount of joint production cost that Lankip would allocate to the Second Main Product by using the physical quantities method=$2,442,840*167,000/267,200=$1,526,775
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.