Method 2 for Product A, B, and C Note: Method 1 - The net realizable vale from s

Question

Method 2 for Product A, B, and C

Note: Method 1 - The net realizable vale from sale of the by- proudctss is deducted from the joint costs before allocation.

Note: Method 2 - The proceeds from sale of the by-product are treated as other revenue

Build a worksheet to allocate joint product costs using the NRV method after additional processing, and calcuate the gross profit on Products A, Product B, and Product C. Product A is a by-product, and your worksheet should calculate the gross profit using both methods for accounting for a by-product. Joint Product Cost $                                 300,000 Product A Product B Product C Sales Value at Split-Off $                                   10,000 $                       320,000 $                       180,000 Additional processing costs                              25,000                              35,000 Sales value if processed further $                       370,000 $                       220,000 Gross Profit: Method 1 for Product A, B, and C

Method 2 for Product A, B, and C

Note: Method 1 - The net realizable vale from sale of the by- proudctss is deducted from the joint costs before allocation.

Note: Method 2 - The proceeds from sale of the by-product are treated as other revenue

Explanation / Answer

Method 1 - The net realizable vale from sale of the by- proudctss is deducted from the joint costs before allocation. Product A Product B Product C Total Sales Value at Split-Off 10,000 3,20,000 1,80,000 5,10,000 Additional processing costs 25,000 35,000 60,000 Sales value if processed further 3,70,000 2,20,000 5,90,000 Sales of By product 0 50,000 40,000 90,000 Additional processing Cost 25,000 35,000 60,000 Net Realisable Value 25,000 5,000 30,000 Joint Product Cost          3,00,000 Less: NRV of by product             30,000 Net Cost          2,70,000 Product A Product B Product C Total Sales Value at Split-Off 10,000 3,20,000 1,80,000 5,10,000 Cost in the ratio of sales          5,294          1,69,412             95,294          2,70,000 Gorss Profit          4,706          1,50,588             84,706          2,40,000 The proceeds from sale of the by-product are treated as other revenue Product A Product B Product C Total Sales Value at Split-Off 10,000 3,20,000 1,80,000 5,10,000 Sales Value of By product 50,000 40,000 90,000 Total Sales value 10,000 3,70,000 2,20,000 6,00,000 Cost 300000 in ratio of sales at split point          5,882          1,88,235          1,05,882 3,00,000 Additional processing Cost 25,000 35,000 60,000 Gross Profit          4,118          1,56,765             79,118          2,40,000

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