Question

Bennett Corporation Year 4 Production

Kerosene and Fuel Oil—Allocation by Unit Volume

Kerosene—3,500 gallons/mt. for 3 months and 4,260 gallons/mt. for 9 months Fuel oil—8,490 gallons/mt. for 4 months and 10,000 gallons/mt. for 8 months Joint costs: $45,000

Liquid Asphalt and Gasoline—Relative NRV (Sales Value Known at Split-Off)

Bennett Corporation is a petroleum manufacturer which produces several sets of joint products; these products include kerosene and fuel oil, liquid asphalt and gasoline, and coal tar and paraffin. A senior cost accountant for Bennett has been asked by her boss to take all three sets of products and allocate the associated joint costs based on three different allocation methodologies.

Using the information included within the exhibit, complete the table below for Year 4.

• For each product in column A, calculate the allocated joint costs and enter your associated response rounded to whole numbers in column B. If a response is zero, enter a zero (0).

1

AB

Product	Allocated Joint Costs
Kerosene
Fuel oil
Liquid asphalt
Gasoline
Coal tar
Paraffin

Liquid asphalt—2,850 gallons sold at $13/unit Gasoline—1,900 gallons sold at $18/unit Joint costs: $6,500

Coal Tar and Paraffin—Relative NRV (No Sales Value Known at Split-Off)

Coal tar—4,000 pounds sold at $40/unit; further processing costs: $52,000 Paraffin—2,800 pounds sold at $60/unit; further processing costs: $36,000 Joint costs: $80,000

Answer 1

Allocation of Joint Costs using Physical units method
Joint Cost	$3,00,000.00
	Board feet	Weights(A)	Joint Cost(B)	Allocated Joint Cost(AxB)
First and seocnd	75000	0.1500	$ 3,00,000.00	$                                45,000
No 1 common	200000	0.4000	$ 3,00,000.00	$                             1,20,000
No 2 common	100000	0.2000	$ 3,00,000.00	$                                60,000
No 3 common	125000	0.2500	$ 3,00,000.00	$                                75,000
	500000			$           3,00,000.00
Option (D) is Correct