Question

The following questions relate to Kyle Company, which manufactures products KA, KB, and KC from a joint process. Joint product costs were $190,000. Additional information follows: If Processed Further Product Units Produced Sales Value at Split-Off Sales Values Additional Costs KA 85,000 $ 250,000 $ 340,000 $ 55,000 KB 61,000 220,000 280,000 43,000 KC 25,000 160,000 250,000 31,000 After the publication of recent scientific test results, the government has banned the sale of product KC. IF KC is produced, it must be disposed of in an approved way that costs $204,200 for every 25,000 units produced. Required: a. Assuming that Kyle Company continues to use the physical quantities method of allocation, what joint costs will be allocated to KA and to KB, respectively? (Do not round intermediate calculations.) b. Which, if either, product would you recommend Kyle Company sell at split-off? KA KB None of the above

Answer 1

a.	Product		Joint cost
	KA	=	$ 2,29,500
	KB	=	$ 1,64,700
	Workings:
	Total units of KA	=	85,000
	Total units of KB	=	61,000
	Total units produced	=	1,46,000
	Joint Product Cost	=	$ 1,90,000
	Disposal cost of KC	=	$ 2,04,200
	Total Joint cost	=	$ 3,94,200
	Amount allocated from joint cost to KA:
	(85,000/1,46,000) X $3,94,200	=	$ 2,29,500
	Amount allocated from joint cost to KB:
	(61,000/1,46,000) X $3,94,200	=	$ 1,64,700
b.	None of the above
	Explaination:
	Neither product should be sold at split off. The new allocation is irrelevant to the question. For both products, the additional costs to process further are less than the additional sales value from processing further.