Question
Joint cost allocation Lovely Lotion Inc. produces three different lotions: hand, body, and foot. The lotions are produced jointly in a mixing process that
Joint cost allocation Lovely Lotion Inc. produces three different lotions: hand, body, and foot. The lotions are produced jointly in a mixing process that costs a total of $250 per batch. At the split-off point, one batch produces 80, 40, and 25 bottles of hand, body, and foot lotion, respectively. After the split-off point, hand lotion is sold immediately for $2.50 per bottle. Body lotion is processed further at an additional cost of $0.25 per bottle and then sold for $5.75 per bottle. Foot lotion is processed further at an additional cost of $0.85 per bottle and then sold for $4.00 per bottle. Assume that body and foot lotion could be sold at the split-off point for $3.00 and $3.20 per bottle, respectively. 1. Using the market value at split-off method, allocate the joint costs of production to each product. Round your answers to two decimal places. Market Value Bottles per Bottle Total Market Percent of Total MV Joint Product per Batch at Split-Off Value at Split-Off Split-Off at Joint Costs Allocation Hand lotion % $ Body lotion % % Foot lotion Totals 2. Based on the information provided, should Lovely Lotion Inc. continue processing body and foot lotion after the split-off point? Body lotion Foot lotion 3. Allocate the joint costs of production to each product using the net realizable value method. Round your answers to two decimal places. Bottles Joint Product per Batch Hand lotion Body lotion Foot lotion Totals Market Value Total Market per Bottle at Value at Split-Off Split-Off Market Price Added Cost per Bottle per Bottle NRV per Bottle Greater of Total NRV Total Net and Total Realizable Market Value Value Joint at Split-Off Proportion Costs Allocation % $ % %
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