Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed

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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1

Solution Exhibit 6.21
6.22
Joint and byproducts, estimated net realisable value method.
(30 min) A diagram of the situation is in Solution Exhibit 6.22.
1
Allocate joint costs between Alpha and Gamma Alpha Sales value, 46,200 kg of Alpha × €5

€231,000
(19,800 kg of Beta × €1.20)

€23,760
Deduct marketing costs (Beta)

8,100
Estimated net realisable value (Beta)

15,660
Total final sales value

246,660 Deduct additional costs
Processing (Department Two)

38,000
Processing (Department Four)

23,660 61,660 Estimated net realisable value at split-off point

€185,000 Gamma
Sales value,
40,000 kg
×
€12
€480,000
Deduct processing Department Three)

165,000 Estimated net realisable value at split-off point

€315,000

Estimated net

Allocation of realisable value Weighting
€120,000 joint costs Alpha
€185,000

37%

€44,400 Gamma
315,000 63

75,600
€500,000 100%
€120,000

Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
2
Income statement through gross margin for alpha
Sales
(38,400 kg
×
€5)
€192,000
Production costs Allocated joint costs
€102,000

Department 2

38,000

Department 4

23,660
Total costs of production
163,660
Deduct estimated net realisable
value of Beta

15,900
Net cost of production
147,760
Deduct closing stock

29,552
Cost of goods sold

118,208
Gross margin
€73,792 Estimated net realisable value of Beta equals the revenue from Beta (€24,000) minus its related marketing costs (€8,100). Closing stock equals the net cost of production
(€147,760) times 20%.

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