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Le Monde Company's allocation of joint production costs

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1. Determine Le Monde Company's allocation of joint production costs for the month of October. (Carry calculation of relative proportions to four decimal places)

Joint production costs will be allocated according to the net realizable value

HTP -3 PST-4 RJ-5 Total Production
700000 350000 170000 1220000
Sales Price 3.2 4.8 4
Sales value 2240000 1680000 680000 4600000
Less further
processing cost 699200 652800 48000 1400000
Net realizable value 1540800 1027200 632000 3200000
Proportion of
Total Production 0.48 0.32 0.20
Allocation of Joint costs 654840.0 436560.0 268600.0 1360000

Per unit costs 0.94 1.25 1.58 1.11

2 Determine the dollar values of the finished goods inventories for HTP-3, PST-4 and RJ-5 as of October 31. (Round the cost per gallon to the nearest cent)

3. Suppose Le Monde Company has a new opportunity to sell PST-4 at the split off point for $3.04 per gallon. Prepare an analysis showing whether the company should sell PST-4 at the split off point or continue to process this product further.

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1. Determine Le Monde Company's allocation of joint production costs for the month of October. (Carry calculation of relative proportions to four decimal places)

Joint production costs will be allocated according to the net realizable value

HTP -3 PST-4 RJ-5 Total
Production 700000 350000 170000 1220000
Sales Price 3.2 4.8 4
Sales value 2240000 1680000 680000 4600000
Less further processing cost 699200 652800 48000 1400000
Net realizable value 1540800 1027200 632000 3200000
Proportion of Total Production 0.4815 0.3210 0.1975
Allocation of Joint costs 654840.0000 436560.0000 268600.0000 1360000

Allocation of Joint costs per ...

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This solution is comprised of a detailed explanation to determine Le Monde Company's allocation of joint production costs for the month of October.

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Le Monde Company's Allocation of joint production costs

Le Monde Company is a manufacturer of chemicals for various purposes. One of the processes used by Le Monde produces HTP-3, a chemical used in hot tubs and swimming pools; PST-4, a chemical used in pesticides; and RJ-5, a product that is sold to fertilizer manufacturers. Le Monde uses the net realized value method to allocate joint production costs. The ratio of output quantities to input quantities of direct material used in the joint process remains consistent from month to month. Le Monde Company uses FIFO (first in, first out) in valuing its finished goods inventory.

Data regarding operations for the month of October are as follows. During this month, Le Monde incurred joint production costs of $1,360,000 in the manufacture of HTP-3, PST-4 and RJ-5.

HTP-3 PST-4 RJ-5
Finished goods inventory in gallons (oct 1) 18,000 52,000 3,000
October sales in gallons 650,000 325,000 150,000
October production in gallons 700,000 350,000 170,000
Additional processing costs $699,200 $652,800 $48,000
Final sales value per gallon $3.20 4.80 $4.00

1. Determine Le Monde Company's allocation of joint production costs for the month of October. (Carry calculation of relative proportions to four decimal places)

2. Determine the dollar values of the finished goods inventories for HTP-3, PST-4 and RJ-5 as of October 31. (Round the cost per gallon to the nearest cent)

3. Suppose Le Monde Company has a new opportunity to sell PST-4 at the split off point for $3.04 per gallon. Prepare an analysis showing whether the company should sell PST-4 at the split off point or continue to process this product further.

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