Question
A Chemical Company manufactures joint products Pep and Vim, and a by-product Zest. Costs are assigned to the joint products by the market value method,
A Chemical Company manufactures joint products Pep and Vim, and a by-product Zest. Costs are assigned to the joint products by the market value method, which considers further processing costs in subsequent operations. For allocating cost to the by-product, the market value or reversal cost method is used. Total manufacturing costs for 10,000 units were P172,000 during the quarter. Production and cost data follow:
| Pep | Vim | Zest |
Units Produced | 5,000 | 4,000 | 1,000 |
Sales price per unit | 50.00 | 40.00 | 5.00 |
Further processing cost per unit | 10.00 | 5.00 | 0.00 |
Selling & Adm. Expense per unit | 0.00 | 0.00 | 2.00 |
Operating Profit per unit | 0.00 | 0.00 | 1.00 |
REQUIREMENTS:
1. What is the gross profit for Pep?
2. What is the value of Zest to be deducted from the joint cost?
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