Question

ABC Company produces three products in a joint production process. At the split-off point, all three products are produced further and then sold. Information about these products for 2019, the most recent year, appears below: Product A Product B Product C Units produced ............... 20,000 48,000 12,000 Selling price ................ $41 per unit $50 per unit $65 per unit Additional processing costs .. $18 per unit $16 per unit $36 per unit Joint costs for 2019 totaled $600,000. During 2019, ABC Company sold 10,000 units of Product A; 30,000 units of Product B were sold; and 10,000 units of Product C were sold. Assume there were no beginning inventories of any type in 2019. ABC Company employs the physical units method to allocate joint costs to products.

Calculate the dollar amount of finished goods inventory that ABC Company would report in its December 31, 2019 balance sheet.

Answer 1

1 Calculation of closing stock of inventory 2 Particulars Product A Product B Product C 3 Production units 20,000 48,000 12,000 4 Units sold 10,000 30,000 10,000 Units lying in 5 closing stock 10,000 18,000 2,000 6 7 Allocation of joint cost to products on the basis of physical units produced 9 Particulars Product A Product B Product C Total 10 Total Joint cost 6,00,000 Total units 11 produced 20,000 48,000 12,000 80,000 12 Cost per unit 7.5 total allocated 13 cost 1,50,000 3,60,000 90,000 6,00,000 14 15 Calculation of per unit cost of products and closing value of inventory 16 17 Particulars Product A Product B Product C Allocated joint 18 cost Additional 19 processing cost 18 36 20 Per unit cost 25.5 23.5 43.5 21 closing quantity 10,000 18,000 2,000 Closing value of 22 stock 2,55,000 4,23,000 87,000 23 Total 7,65,000 16

with show formula

1 Calculation of closing stock of inventory 2 Particulars Product A 3 Production units 20000 4 Units sold 10000 Product B 48000 30000 Product C 12000 10000 =D3-D4 5 Units lying in closing stock =B3-B4 =C3-C4 6 7 Allocation of joint cost to products on the basis of physical units produced Product B Product C Total 9 Particulars 10 Total Joint cost Product A 600000 =B3 =D3 =SUM(B11:011) 11 Total units produced 12 Cost per unit =B10/E11 13 total allocated cost =B11*$B$12 =C11*$B$12 =D11*$B$12 =B13+C13+D13 15 Calculation of per unit cost of products and closing value of inventory 17 Particulars Product A Product B Product C 18 Allocated joint cost =$B$12 =$B$12 =$B$12 19 Additional processing cost 20 Per unit cost 21 closing quantity =SUM(B18:B19) =B5 =SUM(C18:C19) =C5 36 =SUM(D18:019) =D5 =C21*C20 =D21*D20 22 Closing value of stock 23 Total 24 =B21*B20 =SUM(B22:D22)