Allocating Joint Product Costs Build a worksheet to allocate joint product costs

Question

Allocating Joint Product Costs Build a worksheet to allocate joint product costs using the NRV method after additional processing, and calcuate the gross profit on Products A, Product B, and Product C. Product A is a by-product, and your worksheet should calculate the gross profit using both methods for accounting for a by-product. Joint Product Cost $                      300,000 Product A Product B Product C Sales Value at Split-Off $                        10,000 $                      320,000 $                      180,000 Additional processing costs                             25,000                             35,000 Sales value if processed further $                      370,000 $                      220,000 Gross Profit: Method 1 Method 2 Allocating Joint Product Costs Build a worksheet to allocate joint product costs using the NRV method after additional processing, and calcuate the gross profit on Products A, Product B, and Product C. Product A is a by-product, and your worksheet should calculate the gross profit using both methods for accounting for a by-product. Joint Product Cost $                      300,000 Product A Product B Product C Sales Value at Split-Off $                        10,000 $                      320,000 $                      180,000 Additional processing costs                             25,000                             35,000 Sales value if processed further $                      370,000 $                      220,000 Gross Profit: Method 1 Method 2

Explanation / Answer

Method 1 : Sale at split -off Allocated join cost =( Sale value of product/ Total sale value of products )x Join cost Product A Product B Product C Total Selling price at split-off                3,20,000         1,80,000          5,00,000 Less: Product cost(joint cost ) ( 3.2 : 1.8)             (1,92,000)       (1,08,000)          3,00,000 Gross profit ( Gross)                1,28,000             72,000          2,00,000 Add: Sale value of by-product              10,000                             -                        -               10,000 Gross profit ( Net)              10,000                1,28,000             72,000          2,10,000 Method 2 : Sale after processing Allocated join cost =( Sale value of product/ Total sale value of products )x Join cost Product A Product B Product C Total Sale value                3,70,000         2,20,000          5,90,000 Less: Product cost(joint cost ) ( 3.2 : 1.8)             (1,92,000)       (1,08,000)          3,00,000 Less: Additional processing cost                 (25,000)           (35,000)             60,000 Gross profit ( Gross)                        -                  1,53,000             77,000          2,30,000 Add: Sale value of by-product              10,000                             -                        -               10,000 Gross profit ( Net)              10,000                1,53,000             77,000          2,40,000

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