Question

Problem 17-29 Joint Costs; Allocation and Production Decisions (LO 17-4, 17-5)

[The following information applies to the questions displayed below.]

Biondi Industries is a manufacturer of chemicals for various purposes. One of the processes used by Biondi produces HTP–3, a chemical used in hot tubs and swimming pools; PST–4, a chemical used in pesticides; and RJ–5, a product that is sold to fertilizer manufacturers. Biondi uses the net-realizable-value method to allocate joint production costs. The ratio of output quantities to input quantities of direct material used in the joint process remains consistent from month to month. Biondi Industries uses FIFO (first-in, first-out) in valuing its finished-goods inventories.

Data regarding Biondi’s operations for the month of October are as follows. During this month, Biondi incurred joint production costs of $1,850,000 in the manufacture of HTP–3, PST–4, and RJ–5.

	HTP–3			PST–4			RJ–5
Finished goods inventory in gallons (October 1)		19,500			54,100			3,300
October sales in gallons		680,000			340,000			165,000
October production in gallons		760,000			380,000			185,000
Additional processing costs	$	904,000		$	846,000		$	66,000
Final sales value per gallon	$	4.30		$	6.30		$	5.30

Problem 17-29 Part 1

Required:

1. Determine Biondi Industries’ allocation of joint production costs for the month of October. (Round the calculation of "Relative Proportion" to the nearest whole percent. Round your final answers to the nearest dollar amount.)

Answer 1

Solution:

Allocation of Joint Cost - NRV Method - Biondi Industries
Particulars	HTP-3	PST-4	RJ-5	Total
Final sale value for gallon produced	$3,268,000.00	$2,394,000.00	$980,500.00	$6,642,500.00
Deduct: Separable Cost	$904,000.00	$846,000.00	$66,000.00	$1,816,000.00
Net Realisable Value	$2,364,000.00	$1,548,000.00	$914,500.00	$4,826,500.00
Relative Proportion	49.0%	32.0%	19.0%	100.0%
Allocation of Joint Cost	$906,500.00	$592,000.00	$351,500.00	$1,850,000.00