Bonanza Co. manufactures products X and Y from a joint processthat also yields a by-product, Z. Revenue from sales of Z istreated as a reduction of joint costs. Additional information is asfollows:
PRODUCTS X Y Z TOTAL Units produced 25,000 25,000 12,500 62,500 Joint costs $ ? $ ? $ ? $ 287,000 Sales value at split-off $ 375,000 $ 187,500 $ 12,500 $ 575,000
Joint costs were allocated using the net realizable value method atthe split-off point. The joint costs allocated to product Xwere
$93,750.
$115,800.
$187,500.
$183,000.
Bonanza Co. manufactures products X and Y from a joint processthat also yields a by-product, Z. Revenue from sales of Z istreated as a reduction of joint costs. Additional information is asfollows:
| PRODUCTS | |||||||||||||
| X | Y | Z | TOTAL | ||||||||||
| Units produced | 25,000 | 25,000 | 12,500 | 62,500 | |||||||||
| Joint costs | $ | ? | $ | ? | $ | ? | $ | 287,000 | |||||
| Sales value at split-off | $ | 375,000 | $ | 187,500 | $ | 12,500 | $ | 575,000 | |||||
Joint costs were allocated using the net realizable value method atthe split-off point. The joint costs allocated to product Xwere
$93,750.
$115,800.
$187,500.
$183,000.
Related questions
Solex Company manufactures three products from a common input ina joint processing operation. Joint processing costs up to thesplit-off point total $99,000 per year. The company allocates thesecosts to the joint products on the basis of their total sales valueat the split-off point. These sales values are as follows: productX, $54,000; product Y, $92,000; and product Z, $61,000.
Each product may be sold at thesplit-off point or processed further. Additional processingrequires no special facilities. The additional processing costs andthe sales value after further processing for each product (on anannual basis) are shown below: |
| Product | Additional Processing Costs | Sales Value after Further Processing | ||
| X | $ | 36,000 | $ | 84,000 |
| Y | $ | 39,000 | $ | 161,000 |
| Z | $ | 10,000 | $ | 79,000 |
| Required: | |
| a. | Compute the incremental profit (loss) for each product. |
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.
