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: The correct journal entry to transfer the joint production costs from WIP to FG, using the production method is

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:  The correct journal entry to transfer the joint production costs from WIP to FG, using the production method is

Quizplus · Accepted Answer

2,250 lbs x $1 = $2,250 (NRV)
$75,000 - $2,250 = $72,750 (remaining joint costs)
Coconut milk - 21,000 x 1.30 = $27,300 (sales value at split off)
Coconut meat - 12,200 x 6.20 = $75,640 (sales value at split off)
$27,300 + $75,640 = $102,940 (total sales value at split off of primary products)
$27,300 ÷ $102,940 x $72,750 = $19,294
$75,640 ÷ $102,940 x $72,750 = $53,456
lbs of coconut skin x coconut skin sales price per unit = NRV of coconut skin
Total joint costs - NRV of coconut skin = remaining joint costs
Coconut milk - units produced x sales price per unit = coconut milk sales value at split off
Coconut meat - units produced x sales price per unit = coconut meat sales value at split off
coconut milk sales value at split off + coconut meat sales value at split off = total sales value at split off of primary products
coconut milk sales value at split off ÷ total sales value at split off of primary products x remaining joint costs = coconut milk allocated joint costs 
coconut meat sales value at split off ÷ total sales value at split off of primary products x remaining joint costs = coconut meat allocated joint costs

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