General Chemical Company (GCC) manufactures two products as partof a joint process: A1 and B1. Joint costs up to the split-offpoint total $21,000. The joint costs are allocated to A1 and B1 inproportion to their relative sales values. At the split-off point,product A1 can be sold for $41,200, whereas product B1 can be soldfor $61,800. Product A1 can be processed further to make productA2, at an incremental cost of $37,000. A2 can be sold for $84,000.Product B1 can be processed further to make product B2, at anincremental cost of $47,000. B2 can be sold for $94,000.
17.
Required information
Joint costs allocated to product A1total:
$8,400.
$12,600.
$10,500.
$21,000.
18.
Required information
Joint costs allocated to product B1total:
$8,400.
$12,600.
$10,500.
$21,000.
19.
Required information
The net change in operating incomeresulting from a decision to manufacture product A2 is:
$42,800 (increase).
$5,800 (decrease).
$5,800 (increase).
$37,000 (increase).
20.
Required information
The net change in operating incomeresulting from a decision to manufacture product B2 is:
$14,800 (increase).
$14,800 (decrease).
$47,000 (decrease).
$32,200 (increase).
General Chemical Company (GCC) manufactures two products as partof a joint process: A1 and B1. Joint costs up to the split-offpoint total $21,000. The joint costs are allocated to A1 and B1 inproportion to their relative sales values. At the split-off point,product A1 can be sold for $41,200, whereas product B1 can be soldfor $61,800. Product A1 can be processed further to make productA2, at an incremental cost of $37,000. A2 can be sold for $84,000.Product B1 can be processed further to make product B2, at anincremental cost of $47,000. B2 can be sold for $94,000. |
17.
Required information
| Joint costs allocated to product A1total: |
$8,400.
$12,600.
$10,500.
$21,000.
18.
Required information
| Joint costs allocated to product B1total: |
$8,400.
$12,600.
$10,500.
$21,000.
19.
Required information
| The net change in operating incomeresulting from a decision to manufacture product A2 is: |
$42,800 (increase).
$5,800 (decrease).
$5,800 (increase).
$37,000 (increase).
20.
Required information
| The net change in operating incomeresulting from a decision to manufacture product B2 is: |
$14,800 (increase).
$14,800 (decrease).
$47,000 (decrease).
$32,200 (increase).
Related questions
Joint Costing
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A. Rockwell Company manufactures products C and R from a jointprocess. The total joint costs are $120,000. The net realizablevalue at split off was $140,000 for 8,000 units of product C and$60,000 for 2,000 units of product R.
1. Using the information in Part a,calculate the amount of joint costs to be allocated to Products Cand R using the NET REALIZABLE VALUE METHOD.
$ 84,000_________ allocated to ProductC $ 36,000________allocated to Product R
B. Darvin Company manufactures products A and B from a jointprocess, which also yields a by-product, X. Darvin accounts for therevenues from its by-product sales as other revenue.
Additional information follows: A BX Total
Unitsproduced 9,000 15,000 6,000 30,000
JointCosts ? ? ? $117,000
Sales value @ split off point $100,000 $100,000 $100,000$300,000
2. Using the information in Part b, calculated the amount ofjoint costs to be allocated to the products :
PHYSICAL UNITSMETHOD $ 43,875___ A $73,125_____B $0______ X
NET REALIZABLE VALUE METHOD $58,500___A $ 58,500____B $ 0______ X
C. Meyer Corp. manufactures products W, X, Y, and Z from a jointprocess. The JOINT COSTS amount to $120,000. Additional informationfollows:
PRODUCT Unitsproduced Sales Value @ split offpoint Further processingcosts Sales value after further
processing
W 7,000 $70,000 $7,500 $90,000
X 5,000 $60,000 $6,000 $70,000
Y 4,000 $40,000 $4,000 $50,000
Z 4,000 $30,000 $3,500 $32,000
Totals 20,000 $200,000 $21,000 $242,000
3. Using the information in Part c, find the following:
Product | Incremental Revenue | Incremental Cost | Process further? yes or no | *Net Realizable Value | $Amt allocated to product using NRVmethod |
w | $20,000 | $7,500 | Yes | $62,500 | $40,800 |
x | $10,000 | $6,000 | Yes | $54,000 | $36,000 |
y | $10,000 | $4,000 | Yes | $36,000 | $24,000 |
z | $2,000 | $3,500 | No | $30,000 | $19,200 |
* must consider whether or not product will be sold at splitor processed further
Answer the following questions related to jointcosts:
Are joint costs allocated to By-products? (yes or )___NO____
What are 2 ways that the proceeds fromby-products can be shown on the Income Statement?
Use the proceeds from the by-productto reduce the joint cost.
The proceeds from the by-product areshown as other revenue in the revenue section of the incomestatement.
The two asset recognition methods:The net realizable value method that shows the net realizable valueof the by-products on the incomestatement as a deduction from thetotal manufacturing cost of the joint products in the period inwhich the by-product is produced. OR The other income at productionpoint method that shows the net realizable value of by-products onthe income statement as other income or other sales revenue in theperiod in which the by-product is
The two revenue methods:The other income at selling point method shows the net salesrevenue from a by-product sold at time of sale on the incomestatement as other income or other sales revenue. OR Themanufacturing cost reduction at selling point method shows the netsales revenue from a by-product sold at time of sale on the incomestatement as a reduction of total manufacturing cost.
What is the difference between BY-PRODUCTS and SCRAP?
By-products are incidental products with a relatively low orminor value in comparison with the sales value of the jointproducts, yet have a positive net realizable value; the proceedsfrom by-products can be shown on the income statement as otherrevenue or as a decrease to the joint cost. On the other hand,scrap is an incidental product that has a negative net realizablevalue; the disposal cost related to the scrap is added to jointcost, which is allocated to the main products.
