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:
$$\begin{array} { | l | c | r | r | }
\hline & \text { Veight } & \text { Sales } & \text { Adit. Processing Costs } \
\hline \mathrm { P } & 300,000 \mathrm { ks } . & \$ 245,000 & \$ 200,000 \
\hline \mathrm { Q } & 100,000 \mathrm { ks } . & 30,000 & - 0 \
\hline \mathrm { R } & 100,000 \mathrm { ks } . & 175,000 & 100,000 \
\hline
\end{array}$$What is the net income of Mallak Company if the estimated net realizable value method of joint cost allocation is used?
A) $20,000.
B) $50,000.
C) $150,000.
D) $350,000.

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: 
$$\begin{array} { | l | c | r | r | } 
\hline & \text { Veight } & \text { Sales } & \text { Adit. Processing Costs } \
\hline \mathrm { P } & 300,000 \mathrm { ks } . & \$ 245,000 & \$ 200,000 \
\hline \mathrm { Q } & 100,000 \mathrm { ks } . & 30,000 & - 0 \
\hline \mathrm { R } & 100,000 \mathrm { ks } . & 175,000 & 100,000 \
\hline
\end{array}$$What is the net income of Mallak Company if the estimated net realizable value method of joint cost allocation is used?
A) $20,000.
B) $50,000.
C) $150,000.
D) $350,000.

Quizplus · Accepted Answer

Using the estimated net realizable value method, the joint costs are allocated based on the relative sales value of the final products. The total sales value of the three products is $500,000 ($200,000 + $250,000 + $50,000). The sales value of the two products that were processed further is $450,000 ($200,000 + $250,000). Therefore, the joint cost allocated to these products is $90,000 ($100,000 x $450,000/$500,000). The total costs incurred for these two products are $70,000 ($30,000 + $40,000). Thus, the net income for these products is $380,000 ($450,000 - $70,000). The net income for the third product is $20,000 ($50,000 - $30,000). Therefore, the total net income for the company is $400,000 ($380,000 + $20,000), which is option B.

The Mallak Company Produced Three Joint Products at a Joint