Question

ABC Company produces three products in a joint production process. At the split-off point, all three products are produced further and then sold. Information about these products for 2019, the most recent year, appears below: Product A Product B Product C Units produced ............... 15,000 25,000 10,000 Selling price ................ $50 per unit $40 per unit $75 per unit Additional processing costs .. $15 per unit $16 per unit $37.50 per unit Joint costs for 2019 totaled $150,000. During 2019, ABC Company sold 12,000 units of Product A; 11,000 units of Product B were sold; and 9,000 units of Product C were sold. Assume there were no beginning inventories of any type in 2019. ABC Company uses the net realizable value method to allocate joint costs to products. Calculate the dollar amount of finished goods inventory that ABC Company would report in its December 31, 2019 balance sheet

Answer 1

Solution :

Allocation of Joint Cost and Computation of ending inventory - NRV Method - ABC Company
Particulars	Product A	Product B	Product C	Total
Sale Value after further processing	$750,000.00	$1,000,000.00	$750,000.00	$2,500,000
Further Processing Cost	$225,000.00	$400,000.00	$375,000.00	$1,000,000
Net Realisable Value	$525,000	$600,000	$375,000	$1,500,000
Weight	0.35	0.40	0.25	1.00
Allocation of Joint Cost	$52,500	$60,000	$37,500	$150,000
Further Processing Cost	$225,000.00	$400,000.00	$375,000.00	$1,000,000.00
Total Production Cost	$277,500.00	$460,000.00	$412,500.00	$1,150,000.00
Nos of units produced	15000	25000	10000
Unit Product Cost	$18.50	$18.40	$41.25
Nos of units in ending inventory	3000	14000	1000
Cost of finished goods inventory to be reported on dec 31 balance sheet	$55,500.00	$257,600.00	$41,250.00	$354,350.00