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Exercises - Joint and By-Product Costing

- Chambers Company produces products X and Z from a joint process with total costs of $8,000 - The document calculates the allocation of joint costs to products X and Z using various cost allocation methods: physical units, sales value at split-off, and net realizable value at split-off - It also calculates whether further processing would be worthwhile for each product based on their incremental revenues and costs

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Lee Tarroza
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661 views2 pages

Exercises - Joint and By-Product Costing

- Chambers Company produces products X and Z from a joint process with total costs of $8,000 - The document calculates the allocation of joint costs to products X and Z using various cost allocation methods: physical units, sales value at split-off, and net realizable value at split-off - It also calculates whether further processing would be worthwhile for each product based on their incremental revenues and costs

Uploaded by

Lee Tarroza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Chambers Company

Chambers Company produces two products from a joint process: X and Z. Joint processing costs for
this production cycle are $8,000.

Disposal
Sales price cost per Further Final sale
per yard at yard at processing price per
Yards split-off split-off per yard yard
X 1,500 $6.00 $3.50 $1.00 $ 7.50
Z 2,200  9.00  5.00  3.00  11.25

If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the
buyer.

1. Using a physical measure, what amount of joint processing cost is allocated to Product X
(round to the nearest dollar)?
Solution:
1,500/3,700 * $8,000 = $3,243
2. Using a physical measure, what amount of joint processing cost is allocated to Product Z
(round to the nearest dollar)?
Solution:
2,200/3,700 * $8,000 = $4,757
3. Using sales value at split-off, what amount of joint processing cost is allocated to Product X
(round to the nearest dollar)?
Solution:
Sales price
Yards at Split-off Total
X 1,500 $6.00 $ 9,000
Z 2,200 $9.00 $19,800
$28,800
$(9,000/28,800) * $8,000 = $2,500

4. Using sales value at split-off, what amount of joint processing cost is allocated to Product Z
(round to the nearest dollar)?
Solution:

Sales price
Yards at Split-off Total
X 1,500 $6.00 $ 9,000
Z 2,200 $9.00 $19,800
$28,800
$(19,800/28,800) * $8,000 = $5,500

5. Using net realizable value at split-off, what amount of joint processing cost is allocated to
Product X (round to the nearest dollar)?
Solution:
Sales price Disposal NRV/
Yards at Split-off Cost/Yard Split-off Total NRV
X 1,500 $6.00 $3.50 $2.50 $ 3,750
Z 2,200 $9.00 $5.00 $4.00 $ 8,800
$12,550
$(3,750/12,550) * $8,000 = $2,390

6. Using net realizable value at split-off, what amount of joint processing cost is allocated to
Product Z (round to the nearest dollar)?
Solution:
Sales price Disposal NRV/
Yards at Split-off Cost/Yard Split-off Total NRV
X 1,500 $6.00 $3.50 $2.50 $ 3,750
Z 2,200 $9.00 $5.00 $4.00 $ 8,800
$12,550
$(8,800/12,550) * $8,000 = $5,610

7. Which products would be processed further?

Incremental Incremental Net


Yards Revenues Costs Difference
X 1,500 $ 1.50 $1.00 $ 0.50
Z 2,200 $ 2.25 $3.00 $(0.75)

Only Product X.

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