Longwood Corporation processes a liquid into three outputs: K-2, K-4, and K-5. The sales value of each of these products for a single batch follows:

The joint costs total $850,000. There are no separable production costs. If K-5 is accounted for as a by-product, its sales is credited to the joint manufacturing costs using method 1 described in the text. 

Required

a. What are the allocated joint costs for the three outputs

1. If K-5 is accounted for as a joint product?

2. If K-5 is accounted for as a by-product?

b. Management does not understand why joint costs are allocated to K-5 differently when it is accounted for as a by-product. Write a brief memo explaining why this occurs.

Transcribed Image Text:

K-2.. K-4... K-5... $579,600 428,400 192,000