Bhimani, Horngren,
Datar and Rajan,
Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
6.15 Joint costs and byproducts. (35–45 min) A diagram of the situation is in Solution Exhibit 6.15.
1 Calculating byproduct deduction to joint costs
Marketing price of X, 100,000 × €3
€300,000
Deduct Gross margin, 10% of sales
30,000
Marketing costs, 25% of sales
75,000
Department 3 separable costs
50,000
Estimated
net realisable value of X €145,000
Joint costs
€800,000
Deduct byproduct contribution
145,000
Net
joint costs to be allocated €655,000
Deduct Est. net
Unit
Final separable realisable Allocation of
sales sales processing value at
€655,000
Quantity price value cost split-off
Weighting joint costs L 50,000 €10
€500,000 €100,000
€400,000 40%
€262,000 W
300,000
€2
€600,000
–
€600,000 60%
€393,000 Totals
€1,100,000
€100,000 €1,000,000 €655,000
Add separable
Joint costs processing allocation costs
Total costs Units Unit cost L €262,000 €100,000 €362,000 50,000
€7.24 W
393,000
–
393,000 300,000 1.31 Totals
€655,000
€100,000 €755,000 350,000 Unit cost for Xor.
2 If all three products are treated as joint products Deduct Est. net Unit Final separable realisable
Allocation of sales sales processing value at
€800,000 Quantity price value cost split-off Weighting joint costs L
50,000
€10
€500,000
€100,000
€400,000 40/125 €256,000 W
300,000 2 600,000
–
600,000 60/125 384,000 X
100,000 3 300,000 50,000 250,000 25/125 160,000 Totals
€1,400,000 €150,000 €1,250,000
€800,000
Add separable Joint costs processing
allocation costs Total costs Units Unit cost L
€256,000
€100,000
€356,000 50,000
€7.12 W
384,000
–
384,000 300,000 1.28 X
160,000 50,000 210,000 100,000 2.10 Totals €800,000 150,000 €950,000 450,000
Bhimani, Horngren, Datar and Rajan,
Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012 Call the attention of students to the differing unit costs between the two assumptions regarding the relative importance of Product X. The point is that, costs of individual products depend heavily on which assumptions are made and which accounting methods and techniques are used.
Share with your friends: 
