Question

Q 3 Taha Compagny produces three products: Product A, Product B, and Product C.

           During the year the joint costs of processing the three products were $400,000. Production and sales value information were as follows:

                                             Sales Value

Product               Units         at Split-Off             Separable Costs            Selling Price

A                       400,000      $20 per unit           $ 20 per unit     $40 per unit

B                       400,000       $18 per unit           $ 15 per unit                $28 per unit

C                       800,000      $12 per unit           $14 per unit                 $17 per unit

a.   Allocate the joint costs using the physical output method.

b.   Allocate the joint costs using the net realizable value method.

c. Allocate the joint costs using sales value at split-off point method.

Answer 1

Solution a:

Allocation of Joint Cost - Physical measure method
Particulars	Product A	Product B	Product C	Total
Output at split off point	400000	400000	800000	1600000
Allocation of Joint Cost	$100,000.00	$100,000.00	$200,000.00	$400,000.00

Solution b:

Allocation of Joint Cost - NRV Method
Particulars	Product A	Product B	Product C	Total
Sale Value after further processing	$16,000,000.00	$11,200,000.00	$13,600,000.00	$40,800,000
Further Processing Cost	$8,000,000	$6,000,000	$11,200,000	$25,200,000
Net Realisable Value	$8,000,000	$5,200,000	$2,400,000	$15,600,000
Allocation of Joint Cost	$205,128	$133,333	$61,538	$400,000

Solution c:

Allocation of Joint Cost- Sale Value at Split off Point
Particulars	Product A	Product B	Product C	Total
Output at split off point	400000	400000	800000	1600000
Selling price at split off	$20	$18	$12
Sale Value at split off	$8,000,000	$7,200,000	$9,600,000	$24,800,000
Allocation of Joint Cost	$129,032	$116,129	$154,839	$400,000

Solution c: