Question

Garrison Co. produces three products — X, Y, and Z — from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Last year all three products were processed beyond split-off. Joint production costs for the year were $120,000. Sales values and costs needed to evaluate Garrison's production policy follow. Units Sales Value at If Processed Further Product Produced Split Off Sales Value Additional Costs x 6,000 $ 40,000 $ 80,000 $ 1,200 y 3,000 15,000 40,000 3,000 z 1,000 16,000 30,000 1,500 The amount of joint costs allocated to product X using the net realizable value method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

Answer 1

Solution:

                                                        X        Y          Z         Total

Units Sold                                    6,000   3,000    1,000    10,000

Price (after addt’l processing)

Separable Processing cost       $1,200  $3,000  $1,500  $5,700

Units Produced                          6,000    3,000    1,000    10,000

Total Joint Cost                                                                $120,000

Sales Price at Split-off

Sales Value

(after addt’l processing)          $80,000  $40,000  $30,000  $150,000

Sales Value at Split Off           $40,000   $15,000   $16,000   $71,000

                                Physical Measure Method

                                        XYZTotal

Units of Production               6,000        3,000        1,000        10,000

Percent of Total                60,0000%  30,0000%  10,0000%  100,0000%

Joint Cost Allocation           $72,000    $36,000    $12,000   $120,000