Computing Joint Costs—Sales Value at Split-Off and Net Realizable Value Methods

Question

Computing Joint Costs—Sales Value at Split-Off and Net Realizable Value Methods

LeMoyne Manufacturing Inc.’s joint cost of producing 2,000 units of Product X, 1,000 units of Product Y, and 1,000 units of Product Z is $50,000. The unit sales values of the three products at the split-off point are Product X–$30, Product Y–$100, and Product Z–$90. Ending inventories include 200 units of Product X, 300 units of Product Y, and 100 units of Product Z. In your interim calculations, round sales value percentages to two decimal places and allocated joint cost to three decimal places.

A.  Assume that Product Z can be sold for $120 a unit if it is processed after split-off at a cost of $10 a unit. Compute the amount of joint cost that would be included in the ending inventory valuation of the three products on the basis of their net realizable values.

Explanation / Answer

Part 1

Part 2.

X Y Z Total No units 2000 1000 1000 Sales Value 30 100 90 Sales revenue at split off point 60000 100000 90000 250000 Percentage of alloction of joint cost 24.00% 40.00% 36.00% Joint Cost 12000 20000 18000 50000 No units 2000 1000 1000 Per Unit Cost 6 20 18 Ending Inventory units 200 300 100 Ending Inventory units value 1200 6000 1800

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