Refer to Figure 6-3. What is the amount of joint costs assigned to Product Y using the sales-value-at-split-off method?
A)£7,200
B)£3,600
C)£18,000
D)£1,200

Question

Quizplus · Accepted Answer

To use the sales-value-at-split-off method, we need to calculate the total sales value for all products at the split-off point. This can be calculated as follows:

Total sales value at split-off point = Sales value of product W at split-off point + Sales value of product X at split-off point + Sales value of product Y at split-off point + Sales value of product Z at split-off point
= (£13,500 - £11,000) + (£10,800 - £9,000) + (£9,000 - £7,000) + (£14,400 - £11,500)
= £2,500 + £1,800 + £2,000 + £2,900
= £9,200

Now we can calculate the proportionate share of joint costs for each product by dividing its individual sales value at the split-off point by the total sales value at the split-off point.

Proportionate share of joint costs for Product Y = (Sales value of product Y at split-off point / Total sales value at split-off point) x Joint costs
= (£9,000 - £7,000) / £9,200 x £18,000
= 0.217 x £18,000
= £3,906

However, the question asks for the amount of joint costs assigned to Product Y, which is different from its proportionate share. To calculate this, we need to subtract the joint costs assigned to the other three products from the total joint costs.

Joint costs assigned to Product W = Proportionate share of joint costs for Product W = (Sales value of product W at split-off point / Total sales value at split-off point) x Joint costs
= (£13,500 - £11,000) / £9,200 x £18,000
= 0.425 x £18,000
= £7,650

Joint costs assigned to Product X = Proportionate share of joint costs for Product X = (Sales value of product X at split-off point / Total sales value at split-off point) x Joint costs
= (£10,800 - £9,000) / £9,200 x £18,000
= 0.163 x £18,000
= £2,934

Joint costs assigned to Product Z = Proportionate share of joint costs for Product Z = (Sales value of product Z at split-off point / Total sales value at split-off point) x Joint costs
= (£14,400 - £11,500) / £9,200 x £18,000
= 0.195 x £18,000
= £3,510

Total joint costs assigned to all products = Joint costs assigned to Product W + Joint costs assigned to Product X + Joint costs assigned to Product Y + Joint costs assigned to Product Z
= £7,650 + £2,934 + £3,906 + £3,510
= £18,000

Therefore, the amount of joint costs assigned to Product Y using the sales-value-at-split-off method is £3,906. Note that this is different from its proportionate share, which was £3,600.