Question

Corey Corporation manufactures joint products W and X. During a recent period, joint costs amounted to $300,000 in the production of 20,000 gallons of W and 60,000 gallons of X. Both products will be processed beyond the split-off point, giving rise to the following data:

	W			X
Separable processing costs	$	40,000		$	160,000
Sales price (per gallon) if processed beyond split-off	$	14		$	12

The joint cost allocated to X under the net-realizable-value method would be:

Multiple Choice

A. $210,000.

B. $180,000.

C. $184,000.

D. $190,000.

E. None of the answers is correct.

Answer 1

Answer

	W	X
Selling price per gallon	14	12
Gallons	20,000	60,000
Sales	280,000	720,000
Separable processing costs	40,000	160,000
Profit	240,000	560,000

Total Profit = 800,000 (240,000 + 560,000)

X’s Share = (X’s profit / Total Profit) * 100

= (560,000 / 800,000) * 100

X’s Share = 70%

X’s Share in Joint Cost = X’s share * Joint Cost

= 70% * 300,000

X’s Share in Joint Cost = $210,000

Answer = $210,000