Advance Managerial Accounting Marpha.Co 1.The Apportion of Joint cost of Product A and B a.

Physical Units Product Kilograms Allocation % Joint cost allocation (% x $93,750) A 2250 30% $28, 125 B 5250 70% $65 625 Total 7500 $93 750

b. Sales value at spilt off point Product Amount A B Total (2250 x15) (5250 x 12)

Revenue 33 750 63 000 96 750

% of total 34.89% 65.11%

Joint cost allocation 32,709.37 61 040.63 93 750

c. Estimated net realizable value Product Kilograms Kilograms price Total Revenue Less, further processing cost Net Realizable value Allocation % Joint cost allocated (% x $93 750)

A 2250 x $ 15 $33,750 4000 $29 750 38.6% $36,187.50

Total 5250 x $12 $63,000 15 750 $47, 250 $77,000 61.4% $93,750 $57,562.50

2. If the two products are further processed into XA and XB: Product XA Incremental cost of further processing =$4 000 Incremental Revenue = ($20 -$15) x 2250 =$ 11, 250 Product XB Incremental cost of further processing =$ 15 750 Incremental Revenue = ($15 -$12) x 5250 = $ 15 750

Sales Cost of goods sold Joint production cost Further processing cost Total Gross Profit/loss Gross Profit / loss percentage

A 33 750 28 125 4 000 32 125 1 625 5%

B 63 000 65 625 15 750 81375 (18 375) -29%

Total 96 750 93 750 19750 113 500

Therefore product B should not be further processed but sold at the spilt off point, whereas product A should be process further as it generates further income for the company.

Resources: Advance Managerial Accounting Course Material

"Market or Sales Value Method--Allocation of Joint Cost:." Market or Sales Value Method--

Allocation of Joint Product Cost. N.p., n.d. Web. 26 Feb. 2014. <http://www.accounting4management.com/market_or_sales_value_method_allocation_of_joint_ cost.htm>.