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Accounting: Direct method of allocating joint costs.

1. Barclay printers has two service departments (maintenance and personnel) and two operating departments (printing and development). Management has decided to allocate maintenance costs on the basis of labor hours worked by the employees in each.

The following is the data:

Maintenance Personnel Printing Developing
Machine hours........------- 1,000 1,000 3,000
Labor hours............ 500 ------ 500 2,000
Dept. direct costs...$15,000 $36,000 $45,000 $30,000


Use the direct method to allocate these service department costs to the operating departments.

2. Smith manufactures four grades of lubricant, W-10, W-20, W-30, W-40, from
a joint process.

Additional information follows:

units sales value additional sales
Product produced at split-off costs values

W-10....... $35,000 $210,000 $22,000 $270,000
W-20......... 25,000 180,000 18,000 210,000
W-30 ....... 20,000 120,000 12,000 150,000
W-40......... 20,000 90,000 7,500 90,000

Totals 100,000 600,000 60,000 720,000


Assuming that total joint costs of $240,000 were allocated using the sales value at split off (net realizable value method), what joint costs were allocated to each product?

Solution Summary

The problem deals with allocating the joint costs using the net realizable method.