Joint Costing

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A. Rockwell Company manufactures products C and R from a joint process. The total joint costs are $120,000. The net realizable value at split off was $140,000 for 8,000 units of product C and $60,000 for 2,000 units of product R.

1. Using the information in Part a, calculate the amount of joint costs to be allocated to Products C and R using the NET REALIZABLE VALUE METHOD.

$ 84,000_________ allocated to Product C $ 36,000________allocated to Product R

B. Darvin Company manufactures products A and B from a joint process, which also yields a by-product, X. Darvin accounts for the revenues from its by-product sales as other revenue. Additional information follows: A B X Total Units produced 9,000 15,000 6,000 30,000 Joint Costs ? ? ? $117,000 Sales value @ split off point $100,000 $100,000 $100,000 $300,000

2. Using the information in Part b, calculated the amount of joint costs to be allocated to the products :

PHYSICAL UNITS METHOD $ 43,875___ A $ 73,125_____B $ 0______ X

NET REALIZABLE VALUE METHOD $ 58,500___A $ 58,500____ B $ 0______ X

C. Meyer Corp. manufactures products W, X, Y, and Z from a joint process. The JOINT COSTS amount to $120,000. Additional information follows: PRODUCT Units produced Sales Value @ split off point Further processing costs Sales value after further

processing W 7,000 $70,000 $7,500 $90,000 X 5,000 $60,000 $6,000 $70,000 Y 4,000 $40,000 $4,000 $50,000 Z 4,000 $30,000 $3,500 $32,000 Totals 20,000 $200,000 $21,000 $242,000

3. Using the information in Part c, find the following:

Product	Incremental Revenue	Incremental Cost	Process further? yes or no	*Net Realizable Value	$Amt allocated to product using NRV method
w	$20,000	$7,500	Yes	$62,500	$40,800
x	$10,000	$6,000	Yes	$54,000	$36,000
y	$10,000	$4,000	Yes	$36,000	$24,000
z	$2,000	$3,500	No	$30,000	$19,200

* must consider whether or not product will be sold at split or processed further

Answer the following questions related to joint costs:

Are joint costs allocated to By-products? (yes or )___NO____

What are 2 ways that the proceeds from by-products can be shown on the Income Statement?

Use the proceeds from the by-product to reduce the joint cost.

The proceeds from the by-product are shown as other revenue in the revenue section of the income statement.

The two asset recognition methods: The net realizable value method that shows the net realizable value of the by-products on the incomestatement as a deduction from the total manufacturing cost of the joint products in the period in which the by-product is produced. OR The other income at production point method that shows the net realizable value of by-products on the income statement as other income or other sales revenue in the period in which the by-product is

The two revenue methods: The other income at selling point method shows the net sales revenue from a by-product sold at time of sale on the income statement as other income or other sales revenue. OR The manufacturing cost reduction at selling point method shows the net sales revenue from a by-product sold at time of sale on the income statement as a reduction of total manufacturing cost.

What is the difference between BY-PRODUCTS and SCRAP?

By-products are incidental products with a relatively low or minor value in comparison with the sales value of the joint products, yet have a positive net realizable value; the proceeds from by-products can be shown on the income statement as other revenue or as a decrease to the joint cost. On the other hand, scrap is an incidental product that has a negative net realizable value; the disposal cost related to the scrap is added to joint cost, which is allocated to the main products.