Question

The Mallak Company produced three joint products at a joint cost of $128,000. Two of these products were processed further. Production and sales were: Product Weight Sales Additional Processing Costs P 314,000 lbs. $ 269,500 $ 214,000 Q 114,000 lbs. 44,000 -0- R 114,000 lbs. 206,500 114,000 Assume Q is a by-product and Mallak uses the cost reduction method of accounting for by-product cost. If estimated net realizable value is used, how much of the joint costs would be allocated to product R

Answer 1

Answer: $61667

Explanation:

For product P

Sales = $269,500

Less: Additional processing cost = $214,000

Net realizable value = $55500

For product Q

Sales = $44,000

Less: Additional processing cost = $0

Net realizable value = $44000

For product R

Sales = $206,500

Less: Additional processing cost = $114,000

Net realizable value = $92500

Total net realizable value = $55500 + $44000 + $92500

= $192000

The cost allocated to product R will be:

= 128000 × 92500/192000

= $61667