Joint Costs and By- Products
I. BL Company produces only two products and incurs joint processing costs that
total P3,750. Products Aba and Ibi are produced in the following quantities
during each month: 4,500 and 6,000 gallons, respectively. BL also runs one ad
each month that advertises both products at a cost of P1,500. The selling price
per gallon for the two products are P20 and P17.50, respectively.
a. What amount of joint processing costs is allocated to each product based on
gallons produced?
b. What amount of advertising cost is allocated to each product based on sales
value?
II. GAB Company produces three products from the same process and incurs joint processing costs of
P3,000.
Mat
Nat
Qat
Gallons
2,300
1,100
500
Sales price
per gallon
at split-off
P 4.50
6.00
10.00
Disposal
cost per
gallon at
split-off
P1.25
3.00
8.00
Further
processing
costs
P1.00
2.00
2.00
Final sales
price per
gallon
P 7.00
10.00
15.00
Disposal costs for the products if they are processed further are:
Mat, P3.00; Nat, P5.50; Qat, P1.00.
a. What amount of joint processing cost is allocated to the three products using sales value at split-off?
b. What amount of joint processing cost is allocated to the three products using net realizable value at
split-off?
III. A Manufacturing Company makes three products: A and B are considered main products and C a byproduct.
Production and sales for the year were:
220,000 lbs. of Product A, salable at P6.00
180,000 lbs. of Product B, salable at P3.00
50,000 lbs. of Product C, salable at P.90
Production costs for the year:
Joint costs
P276,600
Costs after separation:
Product A 320,000
Product B 190,000
Product C 6,900
Required: Using the by-product revenue as a cost reduction and net realizable value
method of assigning joint costs, compute unit costs (a) if C is a by-product of A
Manufacturing Company makes three products: A and B are considered main products
and C a by-product
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Answers:
I.
a. What amount of joint processing costs is allocated to each product based on gallons produced?
Aba = 4,500/10,500 × 3,750 = 1,607
Ibi = 6,000/10,500 × 3,750 = 2,143
b. What amount of advertising cost is allocated to each product based on sales value?
Aba = 4,500 × 20.00 =
90,000/195,000 × 1,500 = 692
Ibi = 6,000 × 17.50 =
105,000/195,000 × 1,500 = 808
195,000
II.
a. What amount of joint processing cost is allocated to the three products using sales value at split-off?
M = 2,300 × 4.50 = 10,350/21,950 × 3,000 = 1,415
N = 1,100 × 6.00 = 6,600/21,950 × 3,000 = 902
Q = 500 × 10.00 =
5,000/21,950 × 3,000 = 683
21,950
b. What amount of joint processing cost is allocated to the three products using net realizable value at splitoff?
=Sales price - disposal cost
4.50 – 1.25 = 3.25
6.00 – 3.00 = 3.00
10.00 – 8.00 = 2.00
M = 2,300 × 3.25 = 7,475 /11,775 × 3,000 = 1,904
N = 1,100 × 3.00 = 3,300 /11,775 × 3,000 = 841
Q = 500 × 2.00 =
1,000 /11,775 × 3,000 = 25
11,775
III.
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Using the by-product revenue as a cost reduction and net realizable value method of assigning joint costs, compute
unit costs (a) if C is a by-product of A Manufacturing Company makes three products: A and B are considered main
products and C a by-product
a. Joint Cost
NRV C
To allocate
276,600
(38,100) (50,000 – 0.90) – 6,900
238,500
Sales Value – Cost after Separation = NRV
220,000 × 6 = 1,320,000 – 320,000 = 1,000,000
180,000 × 3 = 540,000 – 190,000 =
350,000
1,350,000
Allocation
1,000,000/1,350,000 × 238,500 = 176,667
350,000/1,350,000 × 238,500 = 61,833
238,500
Unit Cost:
A (176,667 + 320,000)/220,000 = 2.26
B (61,833 + 190,000)/180,000 = 1.40
b. NRV
A 1,000,000 =
B 350,000 + P38100 =
1,000,000/1,388,100 × 276,600 = 199,265
388,100/1,388,100 × 276,600 = 77,335
1,388,100
Unit Cost
A (199,265 + 320,000)/220,000 = 2.36
B (77,335 + 151,900)/180,000 = 1.27
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