Question
West Coast Designs produces three products: super, deluxe, and generic. Super and deluxe are its main products; generic is a by-product of super. Information on
West Coast Designs produces three products: super, deluxe, and generic. Super and deluxe are its main products; generic is a by-product of super. Information on the past months production processes follows.
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In Department A, 330,000 units of the raw material X-1 are processed at a total cost of $782,870. After processing in Department A, 50 percent of the units are transferred to Department B, and 50 percent of the units (now unprocessed deluxe) are transferred to Department C.
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In Department B, the materials received from Department A are processed at an additional cost of $208,000. Seventy percent of the units become super and are transferred to Department D. The remaining 30 percent emerge as generic and are sold at $5.40 per unit. The additional processing costs to make generic salable are $68,600.
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In Department C, deluxe is processed at an additional cost of $990,000. A normal loss of 10 percent of the units of good output of deluxe occurs in this department. The remaining good output is then sold for $44 per unit.
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In Department D, super is processed at an additional cost of $82,000. After this processing, super can be sold for $20 per unit.
Required: Prepare a schedule showing the allocation of the $782,870 joint cost to super and deluxe using the estimated net realizable value approach. Revenue from the sale of by-products should be credited to the manufacturing costs of the related main product.
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