Question

Euclid Corporation processes a patented chemical, P-1, and produces two outputs, P-11 and P-12. In August, the costs to process P-1 are $140,000 for materials and $320,000 for conversion costs. P-11 has a sales value of $672,000 and P-12 has a sales value of $168,000. Required: Using the net realizable value method, assign costs to P-11 and P-12 for August.

Answer 1

Answer:

$368,000 and $92,000

Explanation:

The computation is shown below:

For P-11

= (Sales value of P-11) × (Total joint cost) ÷ (Total sales value)

where,

Total joint cost = $140,000 + $320,000 = $460,000

Total sales value = $672,000 + $168,000 = $840,000

So, the cost for P-11 is

=($672,000) × ($460,000) ÷ ($840,000)

= $368,000

For P-12

= (Sales value of P-11) × (Total joint cost) ÷ (Total sales value)

where,

Total joint cost = $140,000 + $320,000 = $460,000

Total sales value = $672,000 + $168,000 = $840,000

So, the cost for P-11 is

=($168,000) × ($460,000) ÷ ($840,000)

= $92,000