Question

Webster Company produces 40,000 units of product A, 30,000 units of product B, and 11,500 units...

Webster Company produces 40,000 units of product A, 30,000 units of product B, and 11,500 units of product C from the same manufacturing process at a cost of $355,000. 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, $30 for B, and $2 for C. None of the products requires separable processing. Of the units produced, Webster Company sells 33,000 units of A, 29,000 units of B, and 11,500 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?

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Answer #1

ANSWER

Particulars Amount($)
Joint costs 355,000
Less: Sales of unit C (11,500)
Net joint costs to be allocated 343,500

ending inventory of product A & product B

Particulars Product A Product B
No of units produced $40,000 $30,000
Unit Selling price $40.00 $35.00
Sales Value $1,600,000 $1,050,000
Allocation of joint costs $ 207396* $136103**
Joint cost per unit(207396/40,000) $5.18 $ 4.53
Ending inventory in units*** 7000 1000
Ending inventory $ 36,260 $ 4530

*(343,500*1,600,000)/2650000

**(343,500*1,050,000)/2650000

***ending inventory in units= closing inventory- opening inventory

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