Payton Company uses a joint process to produce two products. The production results in 500 units for Product I and 2,000 units for Product II. The joint process costs are $20,000. Both products must be processed past the split-off point, incurring separable costs of $5 per unit for Product I and $10 per unit for Product II. The market price is $25 and $20 per unit of Products I and II, respectively. Product I has a weight of 20oz per unit, and Product II weighs 25oz per unit. Instructions:
a.Allocate the joint costs to each product using the NRV method.
b.Allocate the joint costs to each product using the physical quantities method.
c.Calculate the difference in allocated costs between the two methods. Which method would you recommend and why?

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The Answer of Payton Company uses a joint process to produce two products. The production results in 500 units for Product I and 2,000 units for Product II. The joint process costs are $20,000. Both products must be processed past the split-off point, incurring separable costs of $5 per unit for Product I and $10 per unit for Product II. The market price is $25 and $20 per unit of Products I and II, respectively. Product I has a weight of 20oz per unit, and Product II weighs 25oz per unit. Instructions:
a.Allocate the joint costs to each product using the NRV method.
b.Allocate the joint costs to each product using the physical quantities method.
c.Calculate the difference in allocated costs between the two methods. Which method would you recommend and why?

Payton Company Uses a Joint Process to Produce Two Products