Question
The Spinner Company makes three products A, B, and C (all three are considered main products) from a joint input, X. The sales value of
The Spinner Company makes three products A, B, and C (all three are considered main products) from a joint input, X. The sales value of the products at the split-off point are: A, $5,000; B, $5,000; and C, $4,000. In May 9,500 pounds of X costing $10,000 were used to produce A, B, and C. There were no by-products or scrap generated from this further processing. There were no beginning or ending inventories of A, B, or C. The May production cost and sales information is as follows:
Production Sales Price Additional Processing Costs
A 5,000 lbs $2 per lb $ 1,000
B 2,000 lbs $4 per lb $ 4,000
C 2,000 lbs $3 per lb $ 1,000
REQUIRED (round all figures to nearest dollar amount)
1. Calculate the allocated joint costs of each product using the net realizable value method for allocating joint costs.
2. Using the sales value at splitoff method, how much of the joint costs should be allocated to A, B, and C.
3. Indicate which products, if any,should be sold at split-off rather than be processed further. What is the difference of making an incorrect decision on net income?
4. Using the physical units method, how much of the joint cost should be allocated to A, B, and C?
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