ACCTG 201 – COST ACCOUNTING

Allocation Joint Costs and Accounting for By-Products

Physical and Monetary Measure

Problem 1

Ratcliff Company produces two products from a joint process: X and Z. Joint processing costs for this production
cycle are P8,000.

Sales price Disposal Further Final sale

per yard at cost per processing price per
Yards split-off yard per yard yard
X 1,500 P6.00 P3.50 P1.00 P 7.50
Z 2,200 9.00 5.00 2.00 11.25

If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.
Compute the joint processing cost to be allocated to each product using:

X Z
a. Physical measure allocation
b. Monetary measure allocation:
- Sales value at split-off
- NRV at split-off
- Approximated NRV at split-off

Problem 2

From joint manufacturing processes, Kobe Corp. makes three products L, M and N. Each product may be
sold at split off or processed further. Additional processing requires no special facilities, and separable
costs of further processing are entirely variable and traceable to the products involved.

For the period just ended, all three products were processed beyond split-off. Joint production costs for
the year were P1,200,000. Sales value and cost were reported as follows:

L M N
Units produced 6,000 4,000 2,000
Sales value at split-off P500,000 P820,000 P480,000
Sales value and costs if
processed further:
Final sales value P840,000 P900,000 P640,000

Separable costs P180,000 P140,000 P160,000

In order not to realize any loss, Kobe should not subject which products to additional processing?
Problem 3

Versatile Company produces four solvents from the same process: C, D, E, and G. Joint product costs are
P9,000. (Round all final answers to the nearest peso.)
Disposal Final
Sales price cost Further sales
per barrel per barrel processing price
Barrels at split-off at split-off costs per barrel
C 750 P10.00 P6.50 P2.00 P13.50
D 1,000 8.00 4.00 2.50 10.00
E 1,400 11.00 7.00 4.00 15.50
G 2,000 15.00 9.50 4.50 19.50

If Versatile sells the products after further processing, the following disposal costs will be incurred: C,
P2.50; D, P1.00; E, P3.50; G, P6.00.

Compute the joint processing cost to be allocated to each product using:

C D E G
a. Physical measure allocation
b. Monetary measure allocation:
- Sales value at split-off
- NRV at split-off
- Approximated NRV at
split-off

Problem 4
Whalen Company manufactures products X and Y from a joint process that also yields a by-product, Z.
Revenue from sales of Z is treated as a reduction of joint costs. Additional information is as follows:
Products
X Y Z Total
Units produced 20,000 20,000 10,000 50,000
Joint costs ? ? ? P262,000
Sales value at
split-off P300,000 P150,000 P10,000 P460,000

Joint costs were allocated using the sales value at split-off approach.

Compute the joint processing cost to be allocated to Product X and Y.