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.

Joint Product	Bottles per Batch	Market Value per Bottle at Split-Off	Total Market Value at Split-Off	Percent of Total MV at Split-Off	Joint Costs	Allocation
Hand lotion	fill in the blank 1	$fill in the blank 2	$fill in the blank 3	fill in the blank 4%	$fill in the blank 5	$fill in the blank 6
Body lotion	fill in the blank 7	fill in the blank 8	fill in the blank 9	fill in the blank 10%	fill in the blank 11	fill in the blank 12
Foot lotion	fill in the blank 13	fill in the blank 14	fill in the blank 15	fill in the blank 16%	fill in the blank 17	fill in the blank 18
Totals	fill in the blank 19		$fill in the blank 20			$fill in the blank 21

2. A lotion manufacturing company produces three types of lotions. After the split-off point the company continues to sell the body lotion and makes $0.25 profit per bottle. The foot lotion generates $0.05 loss per bottle if it continues after the split-off point. Which lotion should be continued after the split-off point?

a. Hand lotion

b. Body lotion

c. Foot lotion

d. Body and foot lotion

abcd

3. Allocate the joint costs of production to each product using the net realizable value method. Round your answers to two decimal places.

Joint Product	Bottles per Batch	Market Value per Bottle at Split-Off	Total Market Value at Split-Off	Market Price per Bottle	Added Cost per Bottle	NRV per Bottle	Total Net Realizable Value	Greater of Total NRV and Total Market Value at Split-Off	Proportion	Joint Costs	Allocation
Hand lotion	fill in the blank 23	$fill in the blank 24	$fill in the blank 25	$fill in the blank 26	$fill in the blank 27	$fill in the blank 28	$fill in the blank 29	$fill in the blank 30	fill in the blank 31%	$fill in the blank 32	$fill in the blank 33
Body lotion	fill in the blank 34	fill in the blank 35	fill in the blank 36	fill in the blank 37	fill in the blank 38	fill in the blank 39	fill in the blank 40	fill in the blank 41	fill in the blank 42%	fill in the blank 43	fill in the blank 44
Foot lotion	fill in the blank 45	fill in the blank 46	fill in the blank 47	fill in the blank 48	fill in the blank 49	fill in the blank 50	fill in the blank 51	fill in the blank 52	fill in the blank 53%	fill in the blank 54	fill in the blank 55
Totals	fill in the blank 56		$fill in the blank 57					$fill in the blank 58			$fill in the blank 59