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

Exercise 35

Joint Product Costing

Choi Company manufactures two skin care lotions, Smooth Skin and Silken Skin, from a joint process. The joint costs incurred are $420,000 for a standard production run that generates 180,000 pints of Smooth Skin and 120,000 pints of Silken Skin. Smooth Skin sells for $2.40 per pint, while Silken Skin sells for $3.90 per pint.

Required

1. Assuming that both products are sold at the split-off point, how much of the joint cost of each production run is allocated to Smooth Skin on a net realizable value basis?

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2. If no additional costs are incurred after the split-off point, how much of the joint cost of each production run is allocated to Silken Skin on the physical measure method basis?

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3. If additional processing costs beyond the split-off point are $1.40 per pint for Smooth Skin and $0.90 per pint for Silken Skin, how much of the joint cost of each production run is allocated to Silken Skin on a net realizable value basis?

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4. If additional processing costs beyond the split-off point are $1.40 per pint for Smooth Skin and $0.90 per pint for Silken Skin, how much of the joint cost of each production run is allocated to Smooth Skin on a physical measure method basis?

Step 1 of 18

Joint product costing:

Joint product is a result of a single input or single set of inputs processed in a single production process. The multiple products have substantial commercial value in comparison to each other. In joint product costing the cost is to be identified up to split-off point and it should designate a proper method for allocating such cost among 2 or more products. Further, if a specific cost is associated with a particular product it should be allocated to such product only.