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COST OF QUALITY 2. Joint Product Allocation And By-Product. The Venson Corporation produces three products: Alpha, Beta, and Gamma. Alpha and Gamma are joint products;
COST OF QUALITY
2. Joint Product Allocation And By-Product. The Venson Corporation produces three products: Alpha, Beta, and Gamma. Alpha and Gamma are joint products; Beta is a by-product. The production processes for a given year are as follows: In Department I, 110,000 pounds of raw material, Rho, are processed at a total cost of P120,000. After processing in Department I, 60% of the units (now Alpha) are transferred to Department II and 40% of the units (now Gamma) are transferred to Department III. In Department II, Alpha is further processed at a total additional cost of P38,000.70% of the units (now Alpha) are transferred to Department IV and 30% emerge as Beta, the by-product, to be sold P 1.20 per pound. Selling expenses related to disposing of Beta are P8,100. In Department IV, Alpha is processed at a total additional cost of P23,660. After this processing, Alpha is ready for sale at P5 per pound. In Department III, Gamma is processed at a total additional cost of P165,000. In this department, as normal loss of units of Gamma occur, which equals 10% of the good output of Gamma. The remaining good output of Gamma is then sold for P12 per pound. 1. Using the net realizable-value approach, allocate P(120,000 of joint cost from Department Ito product Alpha and product Gamma. 2. You believe that there may be a profitable market for Beta as a joint product if it's processed further. With the addition of processing cost of P35,000 and selling costs of P 3,000, it would enable you to sell Beta for P 3.00 per unit. What would be the total manufacturing cost per unit of Beta if it were treated as a joint product instead of a by-product using the net-realizable-value allocation method? Assume that there are no selling expenses related with Alpha and GammaStep by Step Solution
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