Park Company produces three products in a joint process: A, B, and C. The joint costs are described as follows: The split-off values for A, B, and C are £100,000, £120,000 and £80,000, respectively. If management processes A beyond the split-off point, the sales value of A would increase to £150,000. In order to process A further, the company must rent another facility for £24,000, as well as incur additional materials and labour costs equal to £15,000.
Required:
a.
What is the amount of joint costs allocated to products A, B, and C if the sales value at split-off value method is used?
b.
Should the division process A further or sell it at split-off? What is the effect of the decision on gross profit?

Question

Park Company produces three products in a joint process: A, B, and C. The joint costs are described as follows:  The split-off values for A, B, and C are £100,000, £120,000 and £80,000, respectively. If management processes A beyond the split-off point, the sales value of A would increase to £150,000. In order to process A further, the company must rent another facility for £24,000, as well as incur additional materials and labour costs equal to £15,000.
Required: 
a.
What is the amount of joint costs allocated to products A, B, and C if the sales value at split-off value method is used?
b.
Should the division process A further or sell it at split-off? What is the effect of the decision on gross profit?

Quizplus · Accepted Answer

The Answer of Park Company produces three products in a joint process: A, B, and C. The joint costs are described as follows:  The split-off values for A, B, and C are £100,000, £120,000 and £80,000, respectively. If management processes A beyond the split-off point, the sales value of A would increase to £150,000. In order to process A further, the company must rent another facility for £24,000, as well as incur additional materials and labour costs equal to £15,000.
Required: 
a.
What is the amount of joint costs allocated to products A, B, and C if the sales value at split-off value method is used?
b.
Should the division process A further or sell it at split-off? What is the effect of the decision on gross profit?

Park Company Produces Three Products in a Joint Process: A