Nelson SA. obtains two products and a by-product from its production process. By-product revenues are treated as other income and a noncost approach is used to assign costs to them. During the period, 1,200 units were processed at a cost of £12,000 for materials and conversion costs, resulting in the following: Required:
a.
Account for all costs using a physical basis for allocation.
b.
Account for all costs using net realizable value as the basis for allocation.
c.
Account for all costs using final sales value as the basis for allocation.
d.
How much joint costs should be allocated to the by-product?

Question

Nelson SA. obtains two products and a by-product from its production process. By-product revenues are treated as other income and a noncost approach is used to assign costs to them. During the period, 1,200 units were processed at a cost of £12,000 for materials and conversion costs, resulting in the following:  Required: 
a.
Account for all costs using a physical basis for allocation.
b.
Account for all costs using net realizable value as the basis for allocation.
c.
Account for all costs using final sales value as the basis for allocation.
d.
How much joint costs should be allocated to the by-product?

Quizplus · Accepted Answer

The Answer of Nelson SA. obtains two products and a by-product from its production process. By-product revenues are treated as other income and a noncost approach is used to assign costs to them. During the period, 1,200 units were processed at a cost of £12,000 for materials and conversion costs, resulting in the following:  Required: 
a.
Account for all costs using a physical basis for allocation.
b.
Account for all costs using net realizable value as the basis for allocation.
c.
Account for all costs using final sales value as the basis for allocation.
d.
How much joint costs should be allocated to the by-product?

Nelson SA Obtains Two Products and a By-Product from Its Production