ABC Company produces three products in a joint production process. At the split-
ID: 2581317 • Letter: A
Question
ABC Company produces three products in a joint production process. At the
split-off point, all three products are produced further and then sold.
Information about these products for 2018, the most recent year, appears
below:
Product A Product B Product C
Units produced ............... 12,000 18,000 20,000
Selling price ................ $51 per unit $20 per unit $40 per unit
Additional processing costs .. $26 per unit $10 per unit $14 per unit
Joint costs for 2018 totaled $291,200.
During 2018, ABC Company sold 9,500 units of Product A; all 18,000 units
of Product B were sold; and all 20,000 units of Product C were sold.
Assume there were no beginning inventories of any type in 2018.
ABC Company uses the net realizable value method to allocate joint costs
to products.
Calculate the amount of cost of goods sold that ABC Company would report
for 2018. Do not use decimals in your answer.
Explanation / Answer
a)
b)Cost of goods sold =Total additional processing cost+ joint cost
= 707000+291200
= 998200
**additional cost =[9500*26]+[10*18000]+[14*20000]=707000
A B C Unit price 51 20 40 Additional processing cost -26 -10 -14 contribution per unit 25 10 26 units sold 9500 18000 20000 Total contribution /net realizable value 237500 [25*9500] 180000 [10*18000] 520000 937500 Allocation of joint cost [291200/937500]=.3106133 -73771 [.3106133*237500] -55910 [180000*.3106133] -161519 Net income 163729 124090 358481