Question

Part 2: Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned tomatoes. During the summer, the joint costs of processing the tomatoes were $420,000. There was no beginning or ending inventories for the summer. Production and sales value information for the summer were as follows: Product Cases Additional Costs Selling Price Ketchup 100.000 $3.00 per case $28 per case Juice 150,000 5.00 per case $25 per case Canned 200,000 2.50 per case 10 per case Required: a. Determine the amount allocated to each product if the estimated net realizable value method is used. b. Determine the amount allocated to each product if the physical units method is used.

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.

Answer 2 Part 1) Allocation of Joint Cost Based on Net Realisable Value Product Cases Selling Price Additional Cost Per Unit Net Realisable Value Per Unit Total Net realisable value Sales Mix (respective NRV / Total NRV) 0.357 0.429 0.214 2 5 Ketchup 5 juice - Canned 100000 150000 200000 8 25 100 25 20 7.5 2500000 3000000 1500000 7000000 Joint Cost allocated (sales mix*420000) 150000 180000 90000 420000 2.5 0 Thus the final answer 1 Joint cost allocated based on NRV 3 Product 4 Ketchup 5 juice 6 Canned Joint Cost 150000 180000 90000

8 Part 2) Product Cases Sales Mix (cases Joint cost allocated /Total cases) (420000*sales mix) 0 Ketchup 1 juice 2 Canned 100000 150000 200000 450000 0.222 0.333 0.444 93333 140000 186667 420000 5 Thus the final answer 6 Joint cost allocated based on number of products 7 Product Joint Cost 8 Ketchup 93333 9 juice 140000 O Canned 186667 420000