Question

​​​​

1. Silver Fashion produces two types of garments: D’Suits and D’Gowns. The two products share common inputs such as textile and yarn. The production of gowns results in a waste product referred to as cut pieces, which Silver Fashion transfers at negligible costs local household workers. In April 2020, the following data were reported for the production and sales of D’Suits and D’Gowns:

	Joint Costs
Joint Costs of Textile and Yarn	$500,000
	D’Suits	D’Gowns
Beginning Inventory	0	0
Production(in Units)	4,000	5,000
Sales (in Units)	3,800	4,000
Selling price per unit	$1,200	$3,000

Due to the popularity of its products, Silver Fashion decides to add a new line of products that targets modern couples. These new products are produced by making changes to the style and cut of the original D’Suits and D’Gowns to to be sold under the names S’Suits and S’Gowns respectively. Following are the monthly data for all the products:

	Joint Costs		S’Suits	S’Gowns
Joint Costs of Textile and Yarn	$1,000,000
Separable Costs			$1,800,000	$4,500,000
	D’Suits	D’Gowns	S’Suits	S’Gowns
Beginning Inventory	0	0	0	0
Production (in Units)	4,000	6,000	4,000	6,000
Transfer to further process (in Units)	4,000	6,000
Sales (in Units)			4,000	6,000
Selling price per unit	$1,200	$2,200	$2,000	$3,000

Required:

1. Show the diagram to represent the joint cost and joint products
2. Prepare the Joint cost allocation and the Income Statement of Silver Fashion for S’Suits and S’Gowns using the following methods:
   1. Physical-measure method

Net realizable value method

Answer 1