Question

Beverage Drink Company processes direct materials up to the split-off point, where two products, A
and B, are obtained. The following information was collected for the month of July:
Direct materials processed: 2,500 litres (with 20 percent shrinkage)
Production: A 1,500 litres
B 500 litres
Unit sales value at split-off: A $15.00 per litre
B $10.00 per litre
Cost of purchasing 2,500 litres of direct materials and processing it up to the split-off point to yield a
total of 2,000 litres of good products was $4,500. There were no inventory balances of A and B.
Product A may be processed further to yield 1,375 litres of Product Z5 for an additional processing
cost of $150. Product Z5 is sold for $25.00 per litre. There was no beginning inventory and ending
inventory was 125 litres.
Product B may be processed further to yield 375 litres of Product W3 for an additional processing cost
of $275. Product W3 is sold for $30.00 per litre. There was no beginning inventory and ending
inventory was 25 litres.

What is Product Z5's and Product W3's respective production cost per unit, assuming the company
allocates joint costs on the basis of net realizable value?

the answer is 2.6 and 3.61

Answer 1