Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 27

Joint and By-Product Costing (Appendix)

Silverman Company produces 20,000 units of A, 20,000 units of B, and 10,000 units of product C from the same manufacturing process at a cost of $340,000. A and B are joint products, and C is regarded as a by-product. The unit selling prices of the products are $50 for A, $25 for B, and $1 for C. None of the products require additional processing. Of the units produced, Silverman Company sells 18,000 units of A, 19,000 units of B, and 10,000 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?

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

Step 1 of 4

Joint Costs

Often companies produce more than one product in one single process and thus the costs of the processes are known as joint costs. Joint costs include all the costs including direct material, direct labour and overheads of the company. Joint costs are allocated among the joint products and not the by-products as they are only incidental to the process.