Question

Bennett Company produces two products from a joint process: A and C. Joint processing costs for this production cycle are $9,000.

	Yards	Sales price per yard at split-off	Disposal cost per yard at split-off	Further processing per yard	Final sale price per yard
A	1,800	$7.00	$4.50	$1.50	$8.00
C	2,600	10.00	6.00	3.50	12.25

PART 1
If A and C are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Bennett Company. Using sales value at split-off, what amount of joint processing cost is allocated to Product A (round to the nearest dollar)?

Select one:

a. $6,062

b. $4,500

c. $2,938

d. $3,682

PART 2

If A and C are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Bennett Company. Using approximated net realizable value at split-off, what amount of joint processing cost is allocated to Product A (round to the nearest dollar)?

Select one:

a. $4,500

b. $2,934

c. $3,014

d. $2,718

Answer 1

Part-1	Sale value at Split off of Product A	12,600	=1800*7
	Sale value at Split off of Product C	26,000	=2600*10
	Joint processing costs	9,000
	Amount of joint processing cost is allocated to Product A	$ 2,938	=(9000*12600)/(12600+26000)
	Correct answer is option C .
Part-2	Net realizable value at split-off of Product A	3,600	=1800*(8-1.5-4.5)
	Net realizable value at split-off of Product C	7,150	=2600*(12.25-3.5-6)
	Joint processing costs	9,000
	Amount of joint processing cost is allocated to Product A	$ 3,014	=(9000*3600)/(3600+7150)
	Correct answer is option C .