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Determine the Joint Cost
A company produces three products, Y1, Y2, and Y3 in the similar process. The data below reflects average monthly results as:
Y1
Y2
Y3
Monthly output (kg)
40,000
20,000
Sales Value at split off (shs.)
0
30,000
105,000
Sales Value after Split off
45,000
100,000
155,000
Costs of further processing
65,000
The joint costs were Shs.100,000
Required
Assign the joint cost employing the three methods employed to assigned joint costs.
Solution
(i) Physical/Measurement/Unit Method
TOTAL
Physical Output: (Kg)
80,000
Proportion
50%
25%
Joint costs allocated
50,000
25,000
(ii) Constant Gross Margin Rate Method
(iii) Net Realizable Value/Method
Net Realizable Value = Ultimate Sales Value - Separable Costs
Ultimate Sales Value:
Less: Separable Costs
(20,000)
(40,000)
(65,000)
Net Realizable Value:
60,000
90,000
175,000
Proportion on Net Realizable Value
14%
34%
52%
Allocation of Joint Costs:
14,000
34,000
52,000
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