Answer:
1.
Joint costs allocation using the estimated net realizable value method:
Overs: $5,000; Unders: $45,000
2.
Overs should not further process and the company should sell Overs at split-off. It is because the further process cost per unit is more than the incremental in selling price thanks to further process per unit.
Explanation:
1.
We have:
Net realizable value of Overs = Sales value of Overs - Processing cost after split-off of Overs = 2 x 14,000 - 18,000 = $10,000
Net realizable value of Unders = Sales value of Unders - Processing cost after split-off of Unders = 3.14 x 36,000 - 23,040 = $90,000
=> Total net realizable value of the two goods = $100,000; in which Overs accounts for 10%; Unders accounts for 90%.
=> Joint cost allocated to Overs = 10% x 50,000 = $5,000; Joint cost allocated to Unders = 90% x 50,000 = $45,000.
2.
By further processing, one unit of Overs is created the incremental of revenue of: Sell price after further process - Sell price before further processing = $2 - $1.8 = $0.2
Further processing cost per unit of Overs = 18,000 / 14,000 = $1.29.
As revenue incremental per unit is less than further processing cost per unit (0.2 < 1.29); the company should sell Overs at split-off.
