Question

Joint Cost Allocation—Market Value at Split-off Method

Sugar Sweetheart, Inc., jointly produces raw sugar, granulated sugar, and caster sugar. After the split-off point, raw sugar is immediately sold for $0.20 per pound, while granulated and caster sugar are processed further. The market value of the granulated sugar and caster sugar is estimated to both be $0.25 at the split-off point. One batch of joint production costs $1,640 and yields 3,000 pounds of raw sugar, 3,600 pounds of granulated sugar, and 2,000 pounds of caster sugar at the split-off point.

Allocate the joint costs of production to each product using the market value at split-off method.

Joint Product	Allocation
Raw sugar	$
Granulated sugar
Caster sugar
Totals	$

Answer 1

Joint production costs = $1,640

	Fully Processed Monthly Unit Output	Sales Price per Unit	Net Realizable Value	Percent of Value		Estimated Allocated Joint Costs
Raw sugar	3,000	$0.20	$600	600/2,000 = 30	%	1,640 X 30% = $492
Granulated sugar	3,600	$0.25	$900	900/2,000 = 45	%	1,640 X 45% = $738
Caster sugar	2,000	$0.25	$500	500/2,000 = 25	%	1,640 x 25% = $410
Total			$2,000	100	%	$1,640

Joint Product	Allocation
Raw sugar	$492
Granulated sugar	$738
Caster sugar	$410
Totals	$1,640

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