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Compute Full Cost and Processing

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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.

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.

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.

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Solution Preview

1. Total common input cost = $8,000
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.