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Joint Costs Beverage Drink Company processes direct materials up to the splitoff point, where two products, A and B, are obtained. The following information was
Joint Costs Beverage Drink Company processes direct materials up to the splitoff point, where two products, A and B, are obtained. The following information was collected for the month of July: Direct materials processed: 2,500 litres (with 20 percent shrinkage) Production: A 1,500 litres B 500 litres Unit sales value at splitoff: A $15.00 per litre B $10.00 per litre Cost of purchasing 2,500 litres of direct materials and processing it up to the splitoff point to yield a total of 2,000 litres of good products was $4,500. There were no inventory balances of A and B. Product A may be processed further to yield 1,375 litres of Product Z5 for an additional processing cost of $150. Product Z5 is sold for $25.00 per litre. There was no beginning inventory and ending inventory was 125 litres. Product B may be processed further to yield 375 litres of Product W3 for an additional processing cost of $275. Product W3 is sold for $30.00 per litre. There was no beginning inventory and ending inventory was 25 litres. Required: a. What is the expected final sales values of production if Product Z5 is produced? Product W3? (2 marks) b. What is Product Z5's estimated net realizable value? Product W3? (2 marks) c. What amount of joint cost will be allocated to product Z5? Product W3? (2 marks) d. What is Product Z5's total production cost per unit, assuming the company allocates joint costs on the basis of net realizable value? Product W3's? (2 marks)
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