Chapter 6, Problem 13E

Computing joint costs—sales value at split-off and net realizable value methods

D.L. Manufacturing Inc.’s joint cost of producing 1,000 units of Product A, 500 units of Product B, and 500 units of Product C is $20,000. The unit sales values of the three products at the split-off point are Product A–$20, Product B–$200, and Product C–$160. Ending inventories include 100 units of Product A, 200 units of Product B, and 300 units of Product C.

1. a. Compute the amount of joint cost that would be included in the ending inventory valuation of the three products on the basis of their sales value at split off.
2. b. Assume that Product C can be sold for $200 a unit if it is processed after split-off at a cost of $25 a unit. Compute the amount of joint cost that would be included in the ending inventory valuation of the three products on the basis of their net realizable values.