Question 2

The joint cost to produce Products 1A, 2A, 3A and 4A is $2,000. Each of these products can either be sold at the end of the joint production process, or can be processed further into 1B, 2B, 3B and 4B.

Production and selling information is as follows:

Product Name	Product 1A	Product 2A	Product 3A	Product 4A
Batch size (kg)	30	20	6	4
Sales Value ($ per kg)	100	50	2	1
If further processed:
processed from:	Product 1A	Product 2A	Product 3A	Product 4A
processed into:	Product 1B	Product 2B	Product 3B	Product 4B
additional costs (in $)	50	130	120	10
Final batch size (kg)	29	15	6	6
Final Sales value ($/kg)	120	200	100	6

For example, at the end of the joint production process, there are 30 kg of Product 1A produced, and each kg of Product 1A sells for $100/kg. The 30kg batch of Product 1A can either be sold at this point for $3,000 or the batch can be further processed into a batch of Product 1B at an additional cost of $50. This will produce a 29kg batch of Production 1B that sells for $120/kg.

Required:

Part A Assuming that none of the products are byproducts, calculate the how much of the $2,000 joint cost should be allocated to each product using the four methods discussed in class (sales value method, units produced method, net realizable value method, constant gross margin net realizable value method)

Part B How much of the $2,000 joint cost should be allocated to each product using the Net Realizable Value method if product 4 is a byproduct? (hint: first determine if 4A should be processed further in 4B)