Coconuts N More produces two joint products, Coconut Milk and Coconut Meat. The company uses the leftover Coconut Skin as a by-product. All three are produced from joint costs of $75,000: direct materials amounting to $50,000 and another $25,000 for direct labor and manufacturing overhead. Beginning inventory for all three products is zero. Information for production of the product is as follows: How much in joint costs should be allocated to the by-product, using the production method?

Question

Coconuts N More produces two joint products, Coconut Milk and Coconut Meat. The company uses the leftover Coconut Skin as a by-product. All three are produced from joint costs of $75,000: direct materials amounting to $50,000 and another $25,000 for direct labor and manufacturing overhead. Beginning inventory for all three products is zero. Information for production of the product is as follows:  How much in joint costs should be allocated to the by-product, using the production method?

Quizplus · Accepted Answer

2,250 lbs x $1 = $2,250 (NRV) 
Coconut skin units produced in tons x Coconut skin sales per lb = NRV

Coconuts N More Produces Two Joint Products, Coconut Milk and Coconut