PROBLEM 16-30

REQUIREMENT 1
JOINT PROCESSING COST $ 1,020,000.00

A. Sales value @ Split-off Method

Units produced SP/unit Sales value Proportion

Studs 82,000.00 $ 6.00 $ 492,000.00 53%
Decorative Pieces 2,000.00 $ 70.00 $ 140,000.00 15%
Posts 18,000.00 $ 16.00 $ 288,000.00 31%
102,000.00 $ 92.00 $ 920,000.00 100%

B. Physical-measure Method

Units produced Proportion Allocated Joint Cost

Studs 82,000.00 80% $ 820,000.00
Decorative Pieces 2,000.00 2% $ 20,000.00
Posts 18,000.00 18% $ 180,000.00
102,000.00 100% $ 1,020,000.00

C. NRV Method
Fully-processed Sales
Units produced SP/Unit value Further processing Cost
Studs 82,000 $ 6.00 $ 492,000.00 $ -
Decorative Pieces 1,800 $ 110.00 $ 198,000.00 $ 110,000.00
Posts 18,000 $ 16.00 $ 288,000.00 $ -
101,800 $ 132.00 $ 978,000.00 $ 110,000.00

Decorative pieces if not further processed 2,000

Spoilage 200
Decorative pieces if not further processed 1,800

REQUIREMENT 2
For Decorative Pieces:
Units Sales Price per Unit
Revenue with planing and sizing process 1,800 $ 110.00
Less: Revenue without planing and sizing process 2,000 $ 70.00
Incremental Revenue
Incremental Revenue $ 58,000.00
Incremental Cost $ (110,000.00)
Net decrease in Profit if processed further $ (52,000.00)

REQUIREMENT 3
Upon the 6-month early notice of the action to be made by the management, the following might occur:
a. Workers might reduce their efforts in producing the product because of low morale.
b. Lower quality of products will be made.
c. Workers loyalty to the company diminishes and might result in slack time looking for other jobs.

Management may influence such outcome by:

a. Providing incentive schemes with the workers so as not to reduce quality of work.
b. Relocating the workers and thus offering them perhaps a different job.
c. Disseminate understandable information to workers to why such action needs to be taken.
 Allocated Joint Cost
$ 545,478.26
$ 155,217.39
$ 319,304.35
$ 1,020,000.00

Net Realizable Value Proportion Allocated Joint Cost

$ 492,000.00 57% $ 578,156.68
$ 88,000.00 10% $ 103,410.14
$ 288,000.00 33% $ 338,433.18
$ 868,000.00 100% $ 1,020,000.00

Revenue
$ 198,000.00
$ 140,000.00
$ 58,000.00
 g might occur:

ng for other jobs.

o be taken.