JOINT AND BY-PRODUCT Maroon Ltd is a company that produces chemicals for the cleaning industry. One of its processes manufactures join products Y and Z, and by-product X. The company uses the net realizable value of its joint products to allocate joint production costs. The by-product is valued for inventory purposes at its market value less its disposal cost, and this value is used to reduce the joint production cost of P2,015,000. Information regarding the company’s August 2020 operations are presented below: In liters Y Z X Finished Goods inventory, August 1 30,000 100,000 40,000 August Sales 1,340,000 760,000 240,000 August Production 1,600,000 800,000 200,000 In Peso Further Processing cost 1,400,000 1,520,000 Final Sales value per Liter 10 14 Sales value per liter at split off 2.40 Disposal Cost per liter 0.40 Required: Calculate the by-product income Calculate the adjusted joint cost for allocation for August Calculate the allocation of joint cost for August for products Y and Z Calculate the unit cost per product and value of closing inventory The company has an opportunity to sell product Z at split off for P10 per liter. Prepare an analysis to show whether Z should be sold at split off point or further processing. Split your joint costs between join products using physical unit method

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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JOINT AND BY-PRODUCT

Maroon Ltd is a company that produces chemicals for the cleaning industry. One of its processes manufactures join products Y and Z, and by-product X. The company uses the net realizable value of its joint products to allocate joint production costs. The by-product is valued for inventory purposes at its market value less its disposal cost, and this value is used to reduce the joint production cost of P2,015,000. Information regarding the company’s August 2020 operations are presented below:

In liters	Y	Z	X
Finished Goods inventory, August 1	30,000	100,000	40,000
August Sales	1,340,000	760,000	240,000
August Production	1,600,000	800,000	200,000
In Peso
Further Processing cost	1,400,000	1,520,000
Final Sales value per Liter	10	14
Sales value per liter at split off			2.40
Disposal Cost per liter			0.40

Required:

Calculate the by-product income
Calculate the adjusted joint cost for allocation for August
Calculate the allocation of joint cost for August for products Y and Z
Calculate the unit cost per product and value of closing inventory
The company has an opportunity to sell product Z at split off for P10 per liter. Prepare an analysis to show whether Z should be sold at split off point or further processing.
Split your joint costs between join products using physical unit method

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