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Joint and By Product Costing

Forums › ACCA Forums › ACCA MA Management Accounting Forums › Joint and By Product Costing

  • This topic has 3 replies, 2 voices, and was last updated 10 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • November 14, 2014 at 4:37 pm #210020
    Dainty
    Member
    • Topics: 2
    • Replies: 4
    • ☆

    Valley Fruit Limited Produces orange and lime from a process that yields a paste that can be sold to Colgate Palmolive Limited. The paste is considered insignificant in value and can only be sold for a nominal market value. The cost assigned to the paste is its market value less incremental cost incurred subsequent to the point of split-off. Information concerning a batch processed in January 2013 at a joint cost of $100 000 as follows:

    Products Units Produced Additional Cost Market Value
    Orange 10 000 $25000 $60 000
    Lime 20 000 $20 000 $60 000
    Paste 4 000 $2000 $7000

    Management deems the additional cost to be incurred after split off .
    Required:
    Assuming the entity uses the relative sales value method and the NRV of the paste is to be credited to the process account, calculate how much joint cost is to be allocated to orange and Lime.

    Is the market values given the NRV?
    Can you assist in approaching the question

    November 15, 2014 at 11:40 am #210171
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    If you wish me to answer then in future ask in the Ask the ACCA Tutor Forum – this forum is for students to help each other.

    The net realisable value is the market value less the addition cost (so for Orange for example, it is $35,000).

    The paste is a by-product and therefore the NRV is subtracted from the joint cost of 100,000. The remaining 95,000 is apportioned between Orange and Lime on the basis of their total NRV’s

    (You will find it useful to watch the free lecture on joint-costs!)

    November 16, 2014 at 4:21 pm #210462
    Dainty
    Member
    • Topics: 2
    • Replies: 4
    • ☆

    Thank you very much

    November 16, 2014 at 5:14 pm #210494
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

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