Glam Company makes two products from a joint input that have the following infor

Question

Glam Company makes two products from a joint input that have the following information: Product X: 50,000 units produced; sales value per unit at split off is $10; total additional processing costs are $400,000; and the sales value per unit after additional processing is $15. Product Y: 30,000 units produced; sales value per unit at split off is $8; total additional processing costs are $300,000; and the sales value per unit after additional processing is $20. The joint cost incurred to produce the two products to the split off point is $600,000. How much joint cost should be allocated to Product X using the relative sales value at split off as the allocation method? Which products (X or Y) should be processed further?

Explanation / Answer

Glam Company Units Produced Sales Value per Unit @ Split-off Point Additional Processing Costs Sales Value per Unit after Additional Processing Product X 50000 $10 $400,000 $15 Product Y 30000 $8 $300,000 $20 Total Joint Costs $600,000 a) Total Sales Value at Split-off Percentage Product X $500,000 67.57% Product Y $240,000 32.43% Total $740,000 Total Joint Costs $600,000 Joint Costs Allocated to Product X $405,405 Joint Costs Allocated to Product Y $194,595 b) Total Sales Value after Additional Processing Incremental Proceeds after Split-off Point Total Additional Processing Costs Total Incremental Proceeds Product X $750,000 $250,000 $400,000 ($150,000) Product Y $600,000 $360,000 $300,000 $60,000 Product Y should be processed further Please Rate;- LIFEsAVEr

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