Caldwell company produces three varieties of iron ore, X,Y, & Z from joint proce

Question

Caldwell company produces three varieties of iron ore, X,Y, & Z from joint processing of raw mineral iron. The amount of each product produced in the first quarter of 2001 is 50,000 pounds, 150,000 pounds, and 300,000 pounds respectively. The selling price of each product per pound is $10, $7, & $3 respectively. The joint cost is $800,000. The seperable processing costs for each product is $40,000, $60,000 and $20,000 respectively. Determine the following: Joint costs allocated to each product X, Y, & Z using the physical volume method, relative sales value method, and net realizable value method. The unit cost of each product using the net realizable value method.

Explanation / Answer

Hi, Joint costs allocated using the physical volume method: X = 800000*50000/500000 = 80000 Y = 800000*150000/500000 = 240000 Z = 800000*300000/500000 = 480000 Joint costs allocated using the relative sales value method: X Sales Value = 50000*10 = 500000 Y Sales Value = 150000*7 = 1050000 Z Sales Value = 300000*3 = 900000 Joint Cost Allocation: X = 800000*500000/2450000 = 163265.30 Y = 800000*1050000/2450000 = 342857.14 Z = 800000*900000/2450000 = 293877.55 Joint costs allocated using the net realizable method: NRV X = 500000 (Sales Value) - 40000 = 460000 Y = 1050000 - 60000 = 990000 Z = 900000 - 20000 = 880000 Joint Cost Allocation: X = 800000*460000/2330000 = 157939.91 Y = 800000*990000/2330000 = 339914.16 Z = 800000*880000/2330000 = 302145.92 Thanks, Aman

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