Question

Webster Company produces 16,000 units of product A, 18,000 units of product B, and 10,500 units...

Webster Company produces 16,000 units of product A, 18,000 units of product B, and 10,500 units of product C from the same manufacturing process at a cost of $345,000. A and B are joint products, and C is regarded as a by-product. The unit selling prices of the products are $40 for A, $20 for B, and $2 for C. None of the products requires separable processing. Of the units produced, Webster Company sells 9,000 units of A, 17,000 units of B, and 10,500 units of C. The firm uses the net realizable value method to allocate joint costs and by-product costs. Assume no beginning inventory.

Required:

1. What is the value of the ending inventory of product A?

2. What is the value of the ending inventory of product B?

Business   Accounting   
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Answer #1
Total Joint cost 345000
Less: Net realizable value of By product C (10500*2) 21000
Joint cost for Joint products A and B 324000
Product Units Selling price NRV Total % Joint cost Allocated Joint cost
A 16000 40 640000 64% 324000 207360
B 18000 20 360000 36% 324000 116640
1000000
Value of Ending inventory
A B
Allocated Joint cost 207360 116640
Divide: Units Produced 16000 18000
Unit cost 12.96 6.48
Multiply: Ending inventory units 7000 1000
Ending inventory value 90720 6480
Final Answer:
1. value of Ending inventory of Product A: $ 90,720
2. Value of Ending inventory of Product B: $ 6480
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