Problem 2 Caldwell Company produces three varieties of iron ore, X, Y, & Z from
ID: 2463168 • Letter: P
Question
Problem 2
Caldwell Company produces three varieties of iron ore, X, Y, & Z from a 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 processing cost is $800,000. The separable processing costs for each product is $40,000, $60,000 and $20,000 respectively.
Determine the following:
Joint cost allocated to each product X, Y, & Z using the physical volume method, relative sales value method, and net realizable value method.
The unit cost of each product using the net realizable value metho
Explanation / Answer
x
Y
Z
Total
Production (1)
50000
150000
300000
500000
Selling price per units ($) (2)
10
7
3
Sales value(3)=(1)*(2)
500000
1050000
900000
2450000
Separable processing cost ($) (4)
40000
60000
20000
120000
Net income(5)=(3)-(4)
460000
990000
880000
2330000
Joint cost on physical volume method ((1)/500000)*800000
80000
240000
480000
800000
Joint cost on relative sales value method ((3)/2450000)*800000
163265
342857
293878
800000
Joint cost on net realizable value method ((5)/2330000)*800000 (6)
157940
339914
302146
800000
unit cost of each product using the net realizable value method ((4)+(6))/(1)
3.96
2.67
1.07
1.84
x
Y
Z
Total
Production (1)
50000
150000
300000
500000
Selling price per units ($) (2)
10
7
3
Sales value(3)=(1)*(2)
500000
1050000
900000
2450000
Separable processing cost ($) (4)
40000
60000
20000
120000
Net income(5)=(3)-(4)
460000
990000
880000
2330000
Joint cost on physical volume method ((1)/500000)*800000
80000
240000
480000
800000
Joint cost on relative sales value method ((3)/2450000)*800000
163265
342857
293878
800000
Joint cost on net realizable value method ((5)/2330000)*800000 (6)
157940
339914
302146
800000
unit cost of each product using the net realizable value method ((4)+(6))/(1)
3.96
2.67
1.07
1.84
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