Oak View Chemicals produces two main products, M-10 and M-20, and one by-product, B-60, from a...
Oak View Chemicals produces two main products, M-10 and M-20, and one by-product, B-60, from a single input, Chem-X. Products M-10 and M-20 can either be sold at split-off or processed further and sold. A given batch begins with 1,220 gallons of Chem-X with a cost of $109,800. Additional information regarding a batch follows.
| If Processed Further | ||||||||||||
| Product | Units Produced | Unit Sales Value at Split-off | Additional Costs (Per Unit) | Sales Value (Per Unit) | ||||||||
| M-10 | 26,840 | $ | 5.00 | $ | 2.00 | $ | 6.00 | |||||
| M-20 | 17,080 | $ | 10.00 | $ | 4.00 | $ | 16.00 | |||||
| B-60 | 6,100 | $ | 0.50 | NA | NA | |||||||
Oak View Chemicals uses the net realizable at split-off approach to allocate joint costs and treats the sales value of the by-product B-60 as other income.
Required:
The joint cost allocated to product M-10 at Oak View Chemicals for a given batch is:
Multiple Choice
-
$67,100
-
$48,312
-
$46,970
-
$40,713
-
None of the above.
Homework Answers
(B) $48,312
Total Joint Cost = $109800
Sale value at Split off Point:
M-10 = 26840×$5= $134200
M-20 = 17080×$10= $170800
Total sales value at split off point = $134200+$170800=$305000
Joint cost allocated to M-10 = Total Joint cost * Sale value of M-10 at split off / Total sales value at split off
=$109800* $305000/*134200
=$48312
(As the sales value of By-Product B-60 is treated as other income, it is not reduced here from total Joint cost.)
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