Joint Product Cost AllocationMarket Value Method. Boyd Company manufactures three productsA, B, and Cas a result of
Question:
Joint Product Cost Allocation—Market Value Method. Boyd Company manufactures three products—A, B, and C—as a result of a joint process. During October, joint processing costs totaled $288,000. Details regarding each of the three products show: LO5 Product A B C Unitsproduced. 1,000 3,000 5,000 Unitssold. 800 2,500 4,300 Further processingcosts. $25,000 $60,000 $105,000 Sales price perunit. $ 100 $ 80 $ 50 Required:
(1) Compute the cost assigned to the ending inventory of each product and in total, using the market value method for joint product cost allocation. There were no units in finished goods on October 1.
(2) Customers have been found who would be willing to buy all of the output of each product at the split-off point for the following prices: A, $60; B, $65; and C, $25. Show which of the products should be sold at the split-off point.
(3) Would your answer to requirement 2 change if Product B’s further processing cost of $60,000 included $18,000 of allocated fixed costs? Why or why not?
(4) Now suppose the $60,000 cost of B’s further processing includes $18,000 of allocated fixed costs, and the facilities that would be used to further process B have an alternative use. If B is not processed further, the alternative use of these facilities will generate revenues of $6,000 and variable costs of $1,000. Should B be processed further?
Step by Step Answer:
Cost Accounting
ISBN: 9780538828079
11th Edition
Authors: Lawrence H. Hammer, William K. Carter, Milton F. Usry