Lake Ltd. manufactures two products, AA and BB, from a joint process. A production run costs £20,000 and results in 500 units of AA and 2,000 units of BB. Both products must be processed past the split-off point, incurring separable costs of £5 per unit for AA and £10 per unit for BB. The market price is £25 for AA and £20 for BB.
Required:
a.
Allocate joint production costs to each product using the physical units method.
b.
Allocate joint production costs to each product using the net realizable value method.
c.
Allocate joint production costs to each product using the constant gross margin percentage method.

Question

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The Answer of Lake Ltd. manufactures two products, AA and BB, from a joint process. A production run costs £20,000 and results in 500 units of AA and 2,000 units of BB. Both products must be processed past the split-off point, incurring separable costs of £5 per unit for AA and £10 per unit for BB. The market price is £25 for AA and £20 for BB.
Required:
a.
Allocate joint production costs to each product using the physical units method.
b.
Allocate joint production costs to each product using the net realizable value method.
c.
Allocate joint production costs to each product using the constant gross margin percentage method.

Lake Ltd Manufactures Two Products, AA and BB, from a Joint