When sales value exists at both the split off point and after further processing, which sales value do we use? Does it matter what allocation method we use? I am confused by the two questions below. Thank you!
1) This question is from the ICMA's CMA Exam Support Package. The correct Answer is A. The gross profit is calculated using the
sales value after further processing. In this question the joint cost allocated based on
constant gross profit.
A company produces two products that incur $50,000 of joint costs. At the split-off point, 5,000 units of Product 1 and 15,000 units of Product 2 can be sold for $5 and $3 per unit, respectively. These products are processed further. Product 1 incurs $25,000 of separable costs and is then sold for $12 per unit, and Product 2's separable costs total $30,000 with a final selling price of $6 per unit. If the company uses the constant gross profit method to allocate joint costs, the dollar amount of joint costs allocated to Product 1 would bea. $17,000.b. $17,857.c. $18,421.d. $20,000.
2) This one is from a Facebook Group "Free CMA Exam MCQs". You can see it use the sales value for product X at the split off point. The joint cost is allocated based on NRV.
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Wenyan Yuan
Other
Marietta GA
United States
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