Question:
(Joint cost allocation; by-products) Buchan's Junction Manufacturing Corporation uses a joint production process that produces three products at the split-off point. Joint production costs during March were $720,000. The company uses the sales-value method for allocating joint costs. March production information was as follows:
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PRODUCT
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Alpha
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Beta
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Gamma
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Units produced
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2,500
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5,000
|
7,500
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|
Units sold
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2,000
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6,000
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7,000
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Sales prices:
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|
|
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At the split-off point
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$100
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$80
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$20
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|
After further processing
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$150
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$115
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$30
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Costs to process after split-off point
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$150,000
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$150,000
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$100,000
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a. Compute the amount of joint costs allocated to each product assuming that joint cost allocation is based on sales value at the split-off point.
b. Assume that all three products are main products and that they can be sold at the split-off point or processed further, whichever is economically beneficial to the company. Compute the total cost of product Beta in March if joint cost allocation is based on sales value at split-off .
c. Assume that product Gamma is treated as a by-product and that the company accounts for the by-product at net realizable value as a reduction of joint cost. Products Beta and Gamma must be processed further before they can be sold. Compute the total cost of production of products Alpha and Beta in March if joint cost allocation is based on net realizable values. (Round proportions to the nearest whole percentage.)