Park Company produces three products in a joint process: A, B, and C. The joint costs are described as follows: $\begin{array}{lr}
\text { Direct materials } & £ 45,000 \
\text { Direct labour } & 60,000 \
\text { Overhead } & 30,000
\end{array}$ The split-off values for A, B, and C are £100,000, £120,000 and £80,000, respectively. If management processes A beyond the split-off point, the sales value of A would increase to £150,000. In order to process A further, the company must rent another facility for £24,000, as well as incur additional materials and labour costs equal to £15,000.
a.What is the amount of joint costs allocated to products A, B, and C if the sales value at split-off value method is used?
b.Should the division process A further or sell it at split-off? What is the effect of the decision on gross profit?

Question

Park Company produces three products in a joint process: A, B, and C. The joint costs are described as follows: $\begin{array}{lr}
\text { Direct materials } & £ 45,000 \
\text { Direct labour } & 60,000 \
\text { Overhead } & 30,000
\end{array}$ The split-off values for A, B, and C are £100,000, £120,000 and £80,000, respectively. If management processes A beyond the split-off point, the sales value of A would increase to £150,000. In order to process A further, the company must rent another facility for £24,000, as well as incur additional materials and labour costs equal to £15,000. 
a.What is the amount of joint costs allocated to products A, B, and C if the sales value at split-off value method is used?
b.Should the division process A further or sell it at split-off? What is the effect of the decision on gross profit?

Quizplus · Accepted Answer

The Answer of Park Company produces three products in a joint process: A, B, and C. The joint costs are described as follows: $\begin{array}{lr}
\text { Direct materials } & £ 45,000 \
\text { Direct labour } & 60,000 \
\text { Overhead } & 30,000
\end{array}$ The split-off values for A, B, and C are £100,000, £120,000 and £80,000, respectively. If management processes A beyond the split-off point, the sales value of A would increase to £150,000. In order to process A further, the company must rent another facility for £24,000, as well as incur additional materials and labour costs equal to £15,000. 
a.What is the amount of joint costs allocated to products A, B, and C if the sales value at split-off value method is used?
b.Should the division process A further or sell it at split-off? What is the effect of the decision on gross profit?