The Mallak Company produced three joint products at a joint cost of $100,000.Two of these products were processed further.Production and sales were:
$$\begin{array} { | l | c | r | r | }
\hline & \text { Veight } & \text { Sales } & \text { Adit. Processing Costs } \
\hline \mathrm { P } & 300,000 \mathrm { ks } . & \$ 245,000 & \$ 200,000 \
\hline \mathrm { Q } & 100,000 \mathrm { ks } . & 30,000 & - 0 \
\hline \mathrm { R } & 100,000 \mathrm { ks } . & 175,000 & 100,000 \
\hline
\end{array}$$Assume Q is a by-product and Mallak uses the cost reduction method of accounting for by-product cost.If estimated net realizable value is used,how much of the joint costs would be allocated to product R?
A) $38,889.
B) $43,750.
C) $50,000.
D) $62,500.

Question

The Mallak Company produced three joint products at a joint cost of $100,000.Two of these products were processed further.Production and sales were: 
$$\begin{array} { | l | c | r | r | } 
\hline & \text { Veight } & \text { Sales } & \text { Adit. Processing Costs } \
\hline \mathrm { P } & 300,000 \mathrm { ks } . & \$ 245,000 & \$ 200,000 \
\hline \mathrm { Q } & 100,000 \mathrm { ks } . & 30,000 & - 0 \
\hline \mathrm { R } & 100,000 \mathrm { ks } . & 175,000 & 100,000 \
\hline
\end{array}$$Assume Q is a by-product and Mallak uses the cost reduction method of accounting for by-product cost.If estimated net realizable value is used,how much of the joint costs would be allocated to product R?
A) $38,889.
B) $43,750.
C) $50,000.
D) $62,500.

Quizplus · Accepted Answer

Using the cost reduction method, we first allocate joint costs to the main products based on their relative sales values:
Product P: $60,000 x (300/500) = $36,000
Product Q: $60,000 x (100/500) = $12,000
Product R: $60,000 x (100/500) = $12,000
Then, we deduct the net realizable value of the by-product Q from the joint costs:
Joint costs - (NRV of Q x Q's sales volume): 
$100,000 - ($2 x 100) = $99,800
Next, we allocate this adjusted joint cost to the main products based on their relative additional processing costs:
Product P: $99,800 x (50/150) = $33,267
Product R: $99,800 x (100/150) = $66,533
Therefore, $66,533 of joint costs should be allocated to Product R.

The Mallak Company Produced Three Joint Products at a Joint