(CMA)Johnson Manufacturing Company buys Fluron for $0.80 per litre. At the end of processing in Department 1, Fluron splits off into products Alphon, Cryon, and Runon. Alphon is sold at the split-off point, with no further processing. Cryon and Runon require further processing before they can be sold. Cryon is processed in Department 2 and Runon is processed in Department 3. Following is a summary of costs and other related data for the year ended June 30, 20x5: Department
1 2 3
Cost of Fluron $96,000
Direct labour $14,000 $45,000 $65,000
Manufacturing overhead $10,000 $21,000 $49,000
Product
Alphon Cryon Runon
Litres sold 20,000 30,000 45,000
Litres on hand at June 30, 20x5 10,000 - 15,000
Sales in dollars $30,000 $96,000 $141,750
There were no inventories on hand at July 1, 20x4, and there was no Fluron on hand at June 30, 20x5. All litres on hand at June 30, 20x5 were complete as to processing. Johnson uses the net realizable value method of allocating joint costs.
The value of the ending inventory for Alphon is:

Question

Quizplus · Accepted Answer

Since Alphon is sold at the split-off point, there are no joint costs allocated to it. Therefore, the cost of Alphon is simply its purchase cost of $0.80 per litre multiplied by the 20,000 litres sold, which equals $16,000. The ending inventory of Alphon is 10,000 litres, so its value is $0.80 per litre multiplied by 10,000 litres, which equals $8,000.

(CMA)Johnson Manufacturing Company Buys Fluron for $0