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Alma, Inc Has Joint Process That Produces Five Different Products at at the Split-Off

Question 134

Essay

Alma, Inc. has joint process that produces five different products at the split-off point. The joint cost of producing these products is $500. Three of these products are processed further (A, D, and E). Two of these products are not processed further (B and C). Products A, C, and D are main products; Products B and E are by-products.
For product costing purposes, the cost reduction method recognized at the time of production is used for by-product B, and the other income method recognized at the time of sale is used for by-product E (Z).
Product Product After Sales Price Separable Sales Price After
at Split-Off Further Processing at Split-Off Costs Further Processing
A W $200 $120 $400
B -- 50 -- --
C -- 400 -- --
D Y 100 80 320
E Z 10 20 50
a)At what cost will a unit of B be carried in inventory?
b)At what cost will a unit of E be carried in inventory?
c)At what cost will a unit of Z be carried in inventory?
d)How much joint cost will be allocated to product A, if the basis is sales value at split-off point?

Correct Answer:

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a)By-products are carried at their net r...

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