E6-12 Page 354 Making a journal entry—joint products Adirondack Bat Co. processe

Question

E6-12 Page 354

Making a journal entry—joint products Adirondack Bat Co. processes rough timber to obtain three grades of lumber, A, B, and C that are then made into baseball bats. The company allocates joint costs to the joint products on the basis of the sales value at the split-off point. During the month of May, Adirondack incurred total joint production costs of $300,000 in producing the following:

Grade Thousand Board Feet Sales Value per Board Ft
A 200 $200

B 300 $100

C 500 $150


What would be the allocation of the joint costs FOR GRADE A if the company were to use the physical measure method?

What would be the allocation of the joint costs FOR GRADE B if the company were to use the physical measure method?

Explanation / Answer

If physical measure method is used, the total cost of Production will be divided on the basis of Board Feet produced of each grade.

Total Board feets produced = 200+300+500 = 1000 thousand

Joint Cost per thousand Board feet = 300000/1000 = 300

Answer:-

Joint cost for Grade A = 200 * 300 = 60000

i.e. Per board feet of Grade A = 60000/200000 = $ 0.3

Joint cost for Garde B = 300 * 300 = 90000

i.e. Per board feet of Grade B = 90000/300000 = $ 0.3

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