Joint costs and byproducts. (W. Crum) Royston Inc. is a large food processing company. It 1. Net joint costs to be processes 120,000 kilograms of peanuts in the Peanuts Department at a cost of $160,000 to allocated, $131,000 yield 10,000 kilograms of product A, 60,000 kilograms of product B, and 20,000 kilograms of product C.

® Product A is processed further in the Salting Department to yield 10,000 kilograms of salted peanuts at a cost of $20,000 and sold for $10 per kilogram.

® Product B (Raw Peanuts) is sold without further processing at $2 per kilogram.

® Product C is considered a byproduct and is processed further in the Paste Department to yield 20,000 kilograms of peanut butter at a cost of $10,000 and sold for $3 per kilogram.

The company wants to make a gross margin of 10% of revenues on product C and needs to allow 25% of revenues for marketing costs on product C. An overview of operations follows:

REQUIRED 1. Compute unit costs per kilogram for products A, B, and C, treating C as a byproduct. Use the NRV method for allocating joint costs. Deduct the NRV of the byproduct produced from the joint cost of products A and B.
2. Compute unit costs per kilogram for products A, B, and C, treating all three as joint products and allocating joint costs by the NRV method.LO1

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Joint Costs $160,000 Peanuts Department Processing of 120,000 kg Splitoff Point Separable Costs 10,000 kg Salting Department Processing $20,000 20,000 kg Salted Peanuts 10,000 kg $10/kg Raw Peanuts 60,000 kg $2/kg Paste Department Processing $10,000 Peanut Butter 20,000 kg $3/kg