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The following questions relate to Kyle Company, which manufactures products KA, KB, and KC from a...

The following questions relate to Kyle Company, which manufactures products KA, KB, and KC from a joint process. Joint product costs were $198,000. Additional information follows. If Processed Further Product Units Produced Sales Value at Split-Off Sales Values Additional Costs KA 63,000 $ 330,000 $ 420,000 $ 63,000 KB 69,000 300,000 360,000 51,000 KC 33,000 240,000 330,000 39,000 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 $158,400 for every 33,000 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? b. Which, if either, product would you recommend Kyle Company sell at split-off

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Answer #1

Total Joint Cost = $198,000 + $259,800 = $356,400

Total Units = $63,000 + 69,000 = 132,000

Total cost allocated to:

KA = $356,400 × (63,000 ÷ 132,000) = $170,100

KB = $356,400 × (69,000 ÷ 132,000) = $186,300

.

b.)

KA KB
Change in Sales value after further process $420,000 -$330,000 = $90,000 $360,000- $300,000 = $60,000
Additional cost $63,000 $51,000
Net Gain $27,000 $9,000

Both the Products produces a profit if they are further processed , Hence we are reccomending to not sell the products at splitt of and further process them both.

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