50.1K

Verified Solution

Link Copied!

SHC produces three products, A, B and C. A and C are joint products B is a by-product of A no Joint cost is to be allocated to the by-product. The production process for a given year are as follows:

1. In Dept. 1, 110,000 pounds of material XYZ are processed, at a total cost of P120,000. After processing 60% are transferred to Dept. 2 and the balance are transferred to Dept. 3 (now product C)

2. In Dept. 2, the material is further processed at a total additional cost of P38,000, 70% of the units (Product A) are transferred to Dept. 4 and the balance emerge as product B, the by-product, to be sold at P1.20 per pound. The marketing expenses related to B is P8,100.

3. In Department 4, A is processed at a total additional cost of P23,660. After processing, A is ready for sale at P5.00 per pound.

4. In Dept. 3, C is processed at a total additional cost of P165,000. In this department, a normal loss units occurs, which is equal 10% of the good output of C the remaining good output is sold for P12 per pound. The net realizable value of the by-product is treated as an addition to the sales value of A.

QUESTION

If in Dept. 2 product B is no longer considered a by-product but a joint cost product, what proportion of the additional cost in Dept. 2 should be allocated to product A and B?

Answer & Explanation Solved by verified expert

See Answer