Net Realizable ValueMethod, Decision to Sell at Split-off or Process FurtherPacheco, Inc.,produces two...Net Realizable...

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Net Realizable ValueMethod, Decision to Sell at Split-off or Process Further
Pacheco, Inc.,produces two products, overs and unders, in a single process. Thejoint costs of this process were $60,000, and 14,000 units of oversand 36,000 units of unders were produced. Separable processingcosts beyond the split-off point were as follows: overs, $18,000;unders, $23,040. Overs sell for $2.00 per unit; unders sell for$3.14 per unit.
Required:
1.Allocate the $60,000 joint costs using the estimated net realizablevalue method.
Allocated Joint Cost
Overs $
Unders $
2.Suppose that overs could be sold at the split-off point for $1.80per unit. Should Pacheco sell overs at split-off or process themfurther?
Overs be processed further as there will be $ profit if sold atsplit-off.

Answer & Explanation Solved by verified expert

4.4 Ratings (928 Votes)

	Overs	Unders
units	14000	36000
Price	2	3.14
units*price	28000	113040
separable	18000	23040
Difference	10000	90000

1.Ans:

Thus the cost of $60,000 allocated in overs $6000 (=60,000 * 10,000/100,000)

and unders 54,000 (60,000 * 90,000/100,000)

The allocated joint cost= Overs-$6000

Unders-$54000

2. Suppose that overs could be sold at the split-off point for $1.80 per unit. Should Pacheco sell overs at split-off or process them further?

Overs be processed further as there will be $ profit if sold at split-off.

Without processing further there would be a realisation of profits of $12075 thus could be sold at the split-off point for $1.80 per unit.

Particulars	Overs	Unders
Number of units	14000	36000
Selling price per unit	$ 1.80	$ 3.14
Sales value	$ 25,200.00	$ 113,040.00
Minus costs	$ -	$ 23,040.00
Net realizable value	$ 25,200.00	$ 90,000.00
joint cost allocation	$ 13125	$ 46875
Profit	$ 12075	$ 43125

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In: AccountingNet Realizable ValueMethod, Decision to Sell at Split-off or Process FurtherPacheco, Inc.,produces two...Net Realizable ValueMethod, Decision to Sell at Split-off or Process FurtherPacheco, Inc.,produces two products, overs and unders, in a single process. Thejoint costs of this process were $60,000, and 14,000 units of oversand 36,000 units of unders were produced. Separable processingcosts beyond the split-off point were as follows: overs, $18,000;unders, $23,040. Overs sell for $2.00 per unit; unders sell for$3.14 per unit.Required:1.Allocate the $60,000 joint costs using the estimated net realizablevalue method.Allocated Joint CostOvers$Unders$2.Suppose that overs could be sold at the split-off point for $1.80per unit. Should Pacheco sell overs at split-off or process themfurther?Overs be processed further as there will be $ profit if sold atsplit-off.