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

Exercise 41

Joint Products; By-Products (Appendix)

Lond Company produces joint products Jana and Reta, and by-product Bynd. Jana is sold at split-off; Reta and Bynd undergo additional processing. Production data pertaining to these products for the year ended December 31, 2010, were as follows:

	Jana	Reta	Bynd	Total
Joint costs
Variable				$ 88,000
Fixed				148,000
Separate costs
Variable		$120,000	$ 3,000	$123,000
Fixed		90,000	2,000	92,000
Production  in pounds	50,000	40,000	10,000	100,000
Sales price per pound	$ 4.00	$ 7.50	$ 1.10

?Lond had no beginning or ending inventories and no materials were spoiled in production. Bynd's net realizable value is deducted from joint costs. Joint costs are allocated to joint products to achieve the same gross margin percentage for each joint product.

Required

Prepare the following information for Lond Company for the year ended December 31, 2010:

1. Total gross margin.

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2. Allocation of joint costs to Jana and Rate.

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3. Separate gross margins for Jana and Reta.

Step 1 of 9

Joint product and by-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.