Question

Allocating Joint Costs (Appendix). Clemson Products produces two joint products, product Y and Z. Prior to the split-off point, the company incurred $60,000 in joint costs. Clemson Products produced 10,000 yards of product Y and 30,000 yards of product Z produced. Product Y sells for $4 per yard and product Z sells for $2 per yard.

Required:

Allocate joint costs to each product using the physical quantities method (yards), and calculate the profit or loss for each product.

Allocate joint costs to each product using the relative sales value method, and calculate the profit or loss for each product.

Answer 1

Allocate joint costs to each product using the physical quantities method (yards), and calculate the profit or loss for each product.

	Ratio	Allocate joint cost	Profit and loss
Product Y	25%	15000	10000*4-15000 = 25000
Product Z	75%	45000	30000*2-45000 = 15000
Total		60000

Allocate joint costs to each product using the  relative sales value method , and calculate the profit or loss for each product.

	Ratio	Allocate joint cost	Profit and loss
Product Y	40%	24000	10000*4-24000 = 16000
Product Z	60%	36000	30000*2-36000 = 24000
Total		60000