ALVARO, FERNEL JEAN C.

AE212-1741 TTHS 3-5PM

Exercise 8-2. JOINT COST ALLOCATION

The AB Company produces three joint products, A, N and T. During February, the following information was
recorded:
Product A Product N Product T Total

Joint materials - - - P 5,000

Joint processing cost - - - 25,000
Separable processing costs P8,000 P 5,000 P2,000 15,000
Output in units 2,000 5,000 3,000 10,000
Kilograms per unit 5 2 3
Sales price per unit @ split off P5.00 P 3.00 P 4.00 -
Index points 2 4 3

REQUIRED: Compute for the gross profit for each product by allocating the joint cost using:
[a] market value method

Joint No. of units Market Total Ratio of

products Produce value per Market product to
unit Value TMV (%)
A 2,000 P 5.00 10,000 6,760
N 5,000 3.00 15,000 10,140
I 3,000 4.00 12,000 8,100
TOTAL 10,000 37,000 25,000

[b]quantitative unit method

Joint Unit Grams per Total Ratio (%) Joint Cost

Products Produce unit weight in allocated
grams
A 2,000 5 10,000 50 6,760
N 5,000 2 10,000 20 10,140
I 3,000 3 9,000 30 8,100
Total 10,000 29,000 100 25,000

[c] average unit cost method;

Product Units Allocated Joint Cost

A 2,000 P 5,000
N 5,000 12,500
I 3,000 7,500
Total 10,000 P 25,000

[d] weighted average method

Product Units Points Weighted Cost per Joint cost

Units unit
A 2,000 2 4,000 3,000
N 5,000 4 20,000 15,200
I 3,000 3 9,000 6,800
Total 10,000 33,000 25,000
Exercise 8-3. JOINT COST ALLOCATION - HYPOTHETICAL MARKET VALUE
METHOD
JC Company manufactures three different products from a single raw material. A summary of production costs shows:
Product B Product A Product Y Total

Output in kgs 80,000 200,000 160,000 440,000

Selling price/ kg P0.75 P1.00 P1.50

Costs:
Product B Product A Product Y Total
Cost
Materials -0- -0- -0- P90,000
Direct Labor P 3,000 P20,000 P30,000 80,000
Variable FOH 2,000 10,000 16,000 45,000
Fixed FOH 15,000 34,000 30,000 115,000

All separable costs have been assigned to products but the joint cost has not been allocated. All of the year’s output
was sold. Compute for the total cost for each product, allocating the joint cost by the market value method.

Joint No. of Units Market Total Joint cost

Products Produced Value per market Allocation
unit value
B 80,000 0.75 60,000 39,600
A 200,000 1.00 200,000 132,000
Y 160,000 1.50 240,000 158,400
Total 440,000 500,000 330,000

Exercise 8-4. JOINT COST ALLOCATION - MARKET VALUE METHOD

SP Company produces three products: S, I and P, as the result of initial joint processing plus separable processing
after the split-off point. Records for July show the following:
S I P Total
Materials used - - - P150,000
Joint processing cost - - - 170,000
Further processing costs P50,000 P80,000 P70,000 -
Units produced 6,000 12,000 6,250 -
Units sold 4,000 9,000 4,250 -
Unit sales price P 50.00 P 37.50 P 40.00 -
 REQUIRED: Compute for the following
a. The cost assigned to ending inventory for each product and in total, assuming no beginning inventory and
using the market value method for joint cost allocation. In completing this requirement, disregard the
information given in requirement [b]

Total Product S Product I Product P

Sales – units 18,125 4,000 9,000 5,125
Ending inventories 6,125 2,000 3,000 1,125
Sales –peso P 899,500 299,500 400,000 200,000
Joint production P 170,000 51,000 76,500 42,500
Less: Ending Inventory P 26,792 17,000 19,125 7,650
Cost of goods sold P 143,208 34,000 57,375 34,850
Gross profit P 756,292 299,466 342,625 165,150

Exercise 8-5 DIFFERENT METHODS OF ALLOCATING JOINT COSTS

Products A, B and C are produced from a common process and are ready for sale at the point of split-off.
Join costs incurred amount to P500,000. The production data are as follows:
Product Units Est. MV Weight Index
Produced Per unit (kgs) Points
A 500 P350 4 10
B 300 400 3 8
C 200 500 3 5

Required: Allocate the joint cost using:

[a] Market value method

Joint No. of units Market Total Ratio of Joint Cost

products Produce value per Market product to Application
unit Value TMV (%)
A 500 P 350 175,000 221,550
B 300 400 120,000 151,900
C 200 500 100,000 126,600
TOTAL 1,000 395,000 500,000

[b] Quantitative method

Joint Unit Grams per Total Ratio (%) Joint Cost

Products Produce unit weight in allocated
grams
A 500 4 2,000 40 221,550
B 300 3 900 30 151,900
C 200 3 600 30 126,600
TOTAL 1,000 3,500 100 500,000

[c] Average unit cost method

Product Units Allocated Joint Cost

A 500 P 250,000
B 300 150,000
C 200 100,000
TOTAL 1,000 P 500,000

[d] Index of production method

[e]
Product Units Points Weighted Cost per Joint cost
Units unit
 A 500 10 5,000 59.524 297,620
B 300 8 2,400 59.524 142,858
C 200 5 1,000 59.524 59,524
TOTAL 1,000 8,400 P 500,000