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Split off Point and Estimated net realizable value

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Split off Point and Estimated net realizable value

Raw materials are put into production in Department X, and at the end of processing in this department, 3 products appear.
Product A is sold at the split-off point with no further processing. Products B and C require further processing before they are sold.
Product B is processed in Department Y, and product C is processed in Department Z.
The company uses the estimated net realizable value method of allocating joint production costs. Following is the summary of costs and other data for the quarter ended June 30.
At the beginning of the quarter, there were no on hand inventory. All units on hand at the end of the quarter were fully complete and there was no raw material left.

Products A B C
Pounds Sold 19000 58000 71000
Pounds on hand at quarter end 48000 0 43000
Sales $15,200 $72,500 $106,500

Departments X Y Z
Raw Material Cost $56,000 $0 $0
Direct labor Cost $23,500 $43,000 $98,175
Manufacturing Overhead $9,000 $11,800 $40,575

Determine Amounts per product for A,B,& C:
a. Estimated net realizable value used for allocating joint costs
b. joint costs allocated to each

Determine Cost of Goods Sold and Finished goods inventory for quarter end

$ COGS
$ Finished goods inventory

If product A could be processed further at an additional cost $2.00 per pound and then sold for $4.20 per pound, what would the incremental income be from this?

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Solution Summary

The solution provides in Excel along with coaching about how to do this method. Formulas are in the cells for your inspection and understanding.

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