In the first problem presented, despite the fact pattern presented, the question explicitly says to assume that there are no further processing costs. That is why there is no deduction in the sales price as you compute at the split off.
Secondly, the $3,000 of by-product cost (at sales value) is deducted from the joint costs to reduce the joint costs to $90,000. This is the amount that needs to be allocated.
So, what are we left with? A total sales value of $90,000 (10,000 x $4 plus 5,000 x $10). Take the relative values ($40,000 / 90,000) X 90,000(joint cost).
THAT'S IT.
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In the second problem, the joint costs of $96,000 is reduced by $6,000 since the by-product has a split off sales value of $6 per pound for a total of $6,000(1,000 x $6).
Second, the sales values of $8 and $20 are final sales values and have to reduced to the sales value at the split off which requires a $4 reduction because of the additional processing costs. We are left with sales at split off of $4 and $16.
(10,000 x $4) plus (5,000 x $16) gives us a total of $120,000. Take the relative sales value of $40,000 / $120,000 X $90,000(joint costs). We get $30,000 of allocable costs.
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Michael Henry
Controller
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Original Message:
Sent: 04-18-2021 06:38 PM
From: Nupur Mahajan
Subject: Joint product
Which Part? 1 or 2?
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Nupur Mahajan
<maskemail>nupur1188@...</maskemail>
Hartford CT United States
Original Message:
Sent: 04-14-2021 11:19 AM
From: Troy Persaud
Subject: Joint product
The sales-value at split-off method is the same as gross market value method. And yet these two questions have different approaches. The first question used gross sell price while the second question used net selling price. Any idea why?