Baker Company produces three products: A, B, and C from the same process. Joint
ID: 2530994 • Letter: B
Question
Baker Company produces three products: A, B, and C from the same process. Joint costs for this production run are $2,100.
Pounds
Sales price
per lb. at
split-off
Disposal
cost per
lb. at
split-off
Further
processing
per pound
Final
sales price
per pound
800
$6.50
$3.00
$2.00
$ 7.50
1,100
8.25
4.20
3.00
10.00
1,500
8.00
4.00
3.50
10.50
If the products are processed further, Baker Company will incur the following disposal costs upon sale: A, $3.00; B, $2.00; and C, $1.00.
a. Using sales value at split-off, what amount of joint processing cost is allocated to Product C (round to the nearest dollar)?
$959
$725
$700
$416
b. Using net realizable value at split-off, what amount of joint processing cost is allocated to Product C (round to the nearest dollar)?
$706
$951
$444
$700
Pounds
Sales price
per lb. at
split-off
Disposal
cost per
lb. at
split-off
Further
processing
per pound
Final
sales price
per pound
800
$6.50
$3.00
$2.00
$ 7.50
B1,100
8.25
4.20
3.00
10.00
C1,500
8.00
4.00
3.50
10.50
Explanation / Answer
Solution:
Part 1 --
Sales Value at split off point method allocates joint costs on the basis of estimated sales value of a given joint product relative to the sales value of total joint production.
Cost allocated to a joint product = Total Joint Costs x Sale Value of the Product / Sales Value of Total Production
Total Sales Value of Products
Products
Pounds
Sales Price at split off
Total Sales Value at split off
A
800
$6.50
$5,200
B
1100
$8.25
$9,075
C
1500
$8
$12,000
$26,275
Joint Cost allocated to Product C = 2,100 x 12,000 / 26,275 = $959
The correct option is $959
Part 2 ---
Products
Pounds
Sales Price at split off per pound
Disposal Cost per lb at split off
Net Realizable Value at split off per pound
Total Net Realizable Value at split off
A
B
C
D = B-C
A*D
A
800
$6.50
$3.00
$3.50
$2,800
B
1100
$8.25
$4.20
$4.05
$4,455
C
1500
$8
$4
$4.00
$6,000
$13,255
Cost allocated to a joint product C = Total Joint Costs 2,100 x Sale Value of the Product 6,000 / Sales Value of Total Production 13,255
= $951
The correct option is $951
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Products
Pounds
Sales Price at split off
Total Sales Value at split off
A
800
$6.50
$5,200
B
1100
$8.25
$9,075
C
1500
$8
$12,000
$26,275
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