Question
From a particular joint process, Watkins Company produces three products X, Y, and Z. Each product may be sold at the point of split-off or
From a particular joint process, Watkins Company produces three products X, Y, and Z.
Each product may be sold at the point of split-off or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved.
In Year 2020, all three products were processed beyond split-off. Joint production costs for the year were $60,000. Sales values and costs needed to evaluate Watkins' Year 2020 production policy follow:
Joint costs are allocated to the products based on physical volume of output.
Compute gross margin on each product before additional processing.
Units produced and sold 6,000 units $22,000 Product Y 4,000 units $39,000 $45,000 $10,000 Z 2,000 units $24,000 $32,000 Total Sales values at split-off Total Sales value after further processing Further processing (separate) costs $44,000 $ 9,000 $ 7,000Step by Step Solution
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