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Compute Full Cost and Processing

Joint Products, Inc., produces two joint products, X and V using a common input. These are produced in batches. The common input costs $8,000 per batch. To produce the final products (X and V), additional processing costs beyond the split-off point must be incurred. There are no beginning inventories. The accompanying data summarize the operations.

Products
X V
Quantities produced per batch 200 lbs. 400 lbs.
Additional processing costs per batch
beyond split-off $1,800 $3,400
Unit selling prices of completely
processed products $40/lb $10/lb
Ending inventory 2,000 lbs 1,000 lbs.

Required:
a. Compute the full cost of the ending inventory using net realizable value to allocate joint cost.
b. If the selling prices at the split-off point (before further processing) are $35 and $1 per pound of X and V respectively, what should the firm do regarding further processing? Show calculations.

Solution Preview

1. Total common input cost = $8,000
X V
Ending Inventory 2000 1000
Selling Price $40 $10
Value $80,000 ...

Solution Summary

This response determines the full cost of the ending inventory and the cost of further processing.

$2.19