Lonkip Company produces two main products and a by-product out of a joint proces

Question

Lonkip 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 >s used to reduce the joint product on costs before the joint costs are allocated to the main products. Data regarding Lankip's operations for the current month ore presented in the chart below. During the month, Lonkip incurred joint production costs of $2.550.000 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 $1.593.750. $1, 230,000. $1, 275,000. $1,505,775.

Explanation / Answer

1,505,775 Statement showing computations Particulars First Main product Second Main product Total Monthly Output in pounds            91,800.00         153,000.00         244,800.00 Joint costs      2,409,240.00 Allocation based on Qty First = 91,800 / 244,800 * 2,409,240 Second = 153,000 / 244,800 * 2,409,240         903,465.00      1,505,775.00 Joint Costs      2,550,000.00 Less : NRV of By product = 61,200*2.3       (140,760.00) Net Joint costs to be allocated between main products      2,409,240.00

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