Reference no: EM133424606
Question: Sweet Golden Inc produces three products X(15,000 units), Y(10,000 units), Z(25,000 units). Each product can be sold at split off: X ($5 per unit), Y ($7.5 per unit) and Z ($6 per unit). All three products can be further processed to make XX,YY, and ZZ. A fourth product, A, is a by-product of the production process. Product A can be sold for $1 per unit with additional processing. A is processed at splitoff point. At all times by-products are assigned joint cost based on NRV. During April the joint costs of production were $207,500. Production, additional processing costs, and sales value after additional processing information for the month are as follows:
|
Product
|
Units
|
Selling price per unit(after further processing)
|
Additional Processing Cost
|
|
XX
|
15,000
|
$15
|
$70,000
|
|
YY
|
10,000
|
$20
|
$80,000
|
|
ZZ
|
25,000
|
$15
|
$150,000
|
|
A
|
10,000
|
$1
|
$2,500
|
Required:
a. Determine the amount of joint cost allocated to each product if allocation is by NRV of final product.
b. Sales value at splitoff.
c. Determine the amount of joint cost allocated to each product if allocation is by Constant gross margin percentage NPV method
d. Explain why a company allocates joint costs to individual products or services?