Butterfly Corp. manufactures products M1 and M2 from a joint process, which also
ID: 2597272 • Letter: B
Question
Butterfly Corp. manufactures products M1 and M2 from a joint process, which also yields a by-product, B1. Butterfly accounts for the revenues from its by-product sales as other income. Additional information follows: M1 M2 B1 Total Units produced 23,700 13,200 9,700 46,600 Allocated joint costs ? ? ? $ 349,000 Sales value at split-off $ 378,000 $ 252,000 $ 98,000 $ 728,000 Required: Assuming that joint product costs are allocated using the net realizable value at split-off approach, what was the joint cost allocated to product M1?
Explanation / Answer
Note : When the revenues from its by-product sales is treated as other income then all joint costs are allocated to main products
Therefore joint cost of $349,000 to be allocated between the main products M1 and M2
Joint cost allocated to product M1
= (Sales value at split-off for product M1 / Total sales of product M1 & M2 at split off) * joint cost
[$378,000 /($378,000 + $252,000) ] *$349,000 = $209,400
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