Byproduct and Joint Cost Exercises

1. Logan Company manufactures one main product and 2 by products, A and B. for April, the following data are available: Main Product P75,000 P11,500

A P6,000 P1,100

Sales Manufacturing cost after separation Marketing and administrative 6,000 750 expenses Manufacturing cost before split of Profit allowed for A and B is 15% and 12% respectively

By-Product B P3,500 P900 550

Total P84,500 P13,500 7,300 37,500

Required: 1. Calculate manufacturing cost before separation for by-products A and B, using market value reversal cost method. 2. Prepare and Income statement detailing sales and cost for each product 2. Hatteras Corp. manufactures products W, X, Y and Z from a joint process. Additional information follows: Market If process further Units Value at Addition Market Produced Split of al Cost Value W 6,000 80,000 7,500 90,000 X 5,000 60,000 6,000 70,000 Y 4,000 40,000 4,000 50,000 Z 3,000 20,000 2,500 30,000 Required: Assuming that the market value method is used, allocate a share of the total joint production cost of P150,000 to each product 3. Martens Company manufactures joint products X and Y as well as by-product Z. Cumulative joint cost data for the period show P208,000, representing 20,000 completed units processed through the Refining Department at an average cost of P10.20. Costs are assigned to X and Y by the market value method, which considers further processing costs iin subsequent operations. To determine the cost allocation to Z, the market value (reversal cost) method is used. Additional data: Z X Y Quantity processed 2,000 8,000 10,000 units units units Sales price per unit P9 P20 P25 Further processing cost per 2 5 7 unit Marketing and Administrative Expenses 1 per unit Operating profit per unit 2 Required: Compute the joint cost allocated to Z, then the amount to X and Y 4. The Prudential Company produces three products E, S, and C, as the result of joint processing, which costs P150,000 E S C Units produced 30,000 15,000 13,000 Separable processing costs P30,000 P24,000 P27,000

Unit sales price

P4.30

P6.60

P6.00

Required: 1. Allocate the joint cost to the three products using the market value method. 2. Suppose that product S could be sold at the split of point for P5.50. Would that be a good idea? Show calculations. 5. Getty company manufactures three products A, B and C as a result of a joint process. During October, joint processing costs totaled P288,000. Details regarding each of the three products show: A B C Units produced 1,000 3,000 5,000 Units sold 800 2,500 4,300 Further processing costs P25,000 P60,000 P105,000 Sales price per unit P100 P80 P50 Required: 1. Compute the cost assigned to the ending inventory of each product and in total, using the market value method for joint product cost allocation. There were no units in finished goods on October 1 2. Customer have been found who would be willing to buy all of the output of each product at the split of point for the following prices: A, P60; B. P65; C, P25. Show which of the products should be sold at the split of point. 3. Would your answer to requirement 2 change if Product B’s further processing cost of P60,000 included P18,000 of allocated fixed costs? Why or why not? 4. Now suppose the P60,000 cost of B’s further processing includes P18,000 of allocated fixed costs, and the facilities that would be used to further process B have been alternative use. If B is not processed further, the alternative use of these facilities will generate revenue of P6,000 and variable costs of P1,000. Should B be processed further? 5. Plano Company manufactures three products A, B and C from a joint process. The joint costs for January total P100,000. Additional January information follows: Processing Ultimate Product Quantity Cost after Market SOP Value A 3,000 P20,000 P60,000 B 4,000 30,000 110,000 C 3,000 50,000 180,000 Required: 1. Compute the total production cost for each product using the average unit cost method. 2. Compute the total production cost for each product using the market value method 6. Michael Inc. produces four joint products having a manufacturing cost of P70,000 at the split of point. The following data pertain to these products. Units Ultimate Processing Produced Market Value / cost after Weight Unit SOP Factor K 5,000 P5.50 P1,500 3.0 points L 20,000 1.60 3,000 2.0 points M 15,000 1.50 2,500 4.0 points N 10,000 3.00 5,000 2.5 points Required: allocate joint products cost using: a. Average unit cost method b. Weighted average method c. Market value method

7. Kravitz Company’s production schedule shows 10,000 units of X and 8,000 units of Y. Both articles are made from the same raw materials, but units of X and Y require estimated quantities of materials in the ratio of 3:2, respectively. Both articles pass through the same conversion process, but X and Y require estimated production times per unit in the ratio of 6:5 respectively. Required: Complete the unit materials and conversion costs for each product if the total costs are : materials : P92,000; conversion cost, P150,000.

8. Conviser Company produces three products jointly. During May, joint costs totaled P200,000. The following individual product information is available: C L T Production 15,000 10,000 20,000 Sales units 13,000 9,000 10,000 Sales price P20.00 P15.00 P9.50 Separable processing cost P75,000 P25,000 P40,000 Required: 1. Compute the May gross profit, for each product and in total, using the market value allocation method. 2. A customer has ofered to buy all of Product T output at the split of point for P7 per unit. 9. Shafner Corporation produces three products, Alpha, Beta and Gamma. Alpha and Gamma are joint products; Beta is a by product of Alpha. No joint cost is to be allocated to the by product. The production processes for a given year are as follows: a. In Department !, 110,000 pounds of material Rho are processed, at a total cost of P120,000. After processing 60% of the units are transferred to department 2, and 40% of the units (now Gamma) are transferred to Department 3 b. In Department 2, the material is further processed at a total additional cost of P38,000. Seventy percent of the units (now Alpha) are transferred to Department 4 and 30% emerge as Beta, the by product , to be sold at P1.20 per pound. The marketing expense related to Beta is P8,100. c. In Department 4, Alpha is processed at a total additional cost of P23,660. After processing, Alpha is ready for sale at P5 per pound. d. In Department 3, Gamma is processed at a total additional cost of P165,000. In this department, a normal loss of units of Gamma occurs, which equals 10% of the good output of Gamma. The remaining good output is sold for P12 per pound. Required: a. Prepare a schedule showing the allocation of the P120,000 joint cost between Alpha and Gamma, using the market value at split of point and treating the net realizable value of Beta as an addition to the sales value of Alpha. b. Prepare a statement of gross profit for Alpha, independent of the answer to requirement 1 assuming that:  P102,000 of total joint cost is appropriately allocated to Alpha  48,000 pound of Alpha and 20,000 pound of Beta are available for sale  During the year, sales of Alpha were 80% of the pounds available for sale. There was no beginning inventory.  The net realizable value of Beta available for sale is to be deducted from the cost of producing Alpha. The ending inventory of Alpha is to be based on the net cost of production.  All other costs, sales prices, and marketing expenses are those presented in the facts of the original problem.

10. The following data appear in the records for Recklonville Company for February: Process 1 2 3 Unit data: Beginning work in process inventory (1/3 complete in Process 2 and 3) 3,000 3,000 Started or received 32,000 10,000 20,000 32,000 13,000 23,000 ====== ====== ===== Transferred to Process 2 10,000 Transferred to Process 3 20,000 Transferred to finished goods storeroom 9,000 20,000 Transferred out as by product 2,000 Normal loss 1,000 Ending work in process inventory (1/4 complete in process 2 and ½ complete in ________ 4,000 2,000 Process 3 32,000 13,000 23,000 ======= ====== ====== Partial summary of costs Beginning work in process inventory Transferred from process 1 P6,000 P11,500 Labor and factory overhead 2,000 3,000 Cost added by department Material P58,000 Labor and factory overhead 30,000 18,000 60,000 P88,000 Less: market value of by product 4,000 P84,000 ====== Materials are issued in Process 1. At the end of processing in Process 1, the by product appears. The balance of production is transferred out – some to Process 2 for additional processing of one main product and the rest to Process 3 for additional processing of the other main product. The joint cost of Process1, less the market value of the by product, is apportioned to the main products using the market value method at the split of point. Sales prices for the finished products of Processes 2 and 3 are P10 and P15, respectively. The by product sells for P2. Required: 1. Prepare a department cost of production report for February, assuming that the company uses the average costing method (carry unit costs to 4 decimal places and round all other mounts to the nearest peso. 2. Using computations from requirement 1, prepare the journal entries transferring cost from each of the three processes 3. Repeat requirement 1, assuming that the company uses the fifo costing method and that the normal loss in Process 3 is from units transferred in during February. 4. Using computations from requirement 3, prepare journal entries transferring cost from each of the 3 processes