Problem 1

Watkins Company produces three products, X, Y and Z.

each product may be sold at split-off or processed
further. Additional processing requires no special
facilities and production costs of further processing are
entirely variable and traceable to the products involved.
In 2016, all three products were processed beyond split-
off. Joint production costs for the year was P 60,000.
Sales value and costs for 2016 were as follows:
X Y Z
Units 6,000 4,000 2,000
Produced
Sales Value P 25,000 P 41,000 P 24,000
at Split – off
If processed
further:
Final Sales P 42,000 P 45,000 P 32,000
Value
Separable 9,000 7,000 8,000
Costs

Joint costs are allocated to the three products in

proportion to the relative physical volume of output.

1) The relevant cost for a decision to sell Product Z

or process further is?
2) To maximize operating income, which of the
following products should be processed
further?
3) The net income upon maximization is?

Problem 2
Horse Company manufactures products A and B from a
joint process. During 2011, sales values at split-off point
were P 50,000 for 4,000 units of product A and P
100,000 for 12,000 units of product B. selling prices per
unit are P 25.00 and P12.50, respectively for Product A
and B.

1. Assume that Joint Costs allocated to Product A

by using Market Value method was P 40,000,
the production cost of Product B is?
2. Assume that Joint Costs allocated to Product B
by using the average cost method was P 90,000,
the production cost of Product A is?