- A company produces products simultaneously through a refining process costing $93,000. The joint products, Alpha and Beta, have selling prices of $8 and $20 per pound, respectively, after additional processing costs of $4 per pound of each product are incurred after the split-off point. Omega, a by-product, is sold at the split-off point for $6 per pound. The number of pounds produced is shown below.
|
Alpha
|
10,000 pounds
|
|
Beta
|
5,000 pounds
|
|
Omega
|
1,000 pounds
|
Assuming the company inventories Omega, the joint cost allocated to Alpha using the sales value at split-off method is
The joint cost allocated to Alpha using the sales value at split-off method would be $40,000. That is 80,000/186000 * 93,000 =40,000
|
Alpha
|
Beta
|
Omega
|
Total
|
|
Quantity
|
10,000
|
5,000
|
1,000
|
16,000
|
|
Sales price
|
$8
|
$20
|
$6
|
|
|
Sales value
|
$80,000
|
$100,000
|
$6,000
|
$186,000
|
|
Relative value
|
43%
|
53.8%
|
3.2%
|
|
|
Joint cost allocation
|
$40,000
|
$50,000
|
$3,000
|
$93,000
|
Why is the by-product not deducted since it is inventoried?
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Jacqueline Scott-Crossley
Director/Manager
KGN
Jamaica
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