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kindly help to explain the “further processing cost” , why method using NRV at the point of separation needs to subtract sales value then get the amount of NRV at split of point and coupled at joint cost allocation ? my classroom exercise.
but below question why is coupled 159600 :-
Total joint cost production 384,000
further processing costs ( H) 159,600sales unit – G 400,000 & H 200,000
Prod.unit – G 412,000 & H 228,000using physical unit method
G 412,000
H 228,000
= 640,000to get the closing stock of H :
228,000/640,000 x 384,000 joint cost = 136,800
28,000/228,000 x (136.8+159.6) = 36,400
I am puzzled by your question because you are told to use the physical unit method and therefore the NRV at the point of separation is not relevant (and is impossible here anyway because you are not told the final selling price).
Product H is not ready for sale when it leaves the joint process.
Its value when it leaves the process is 136,800 in total, but for it to be ready for sale there is another 159,600 to spend. Therefore to get the value of the closing inventory it needs adding on.understand of 159.6 needs to be added back , thank you explain
however, if using the physical unit method is only output / units measurement but why
the questions to ask further processing costs?please refer to the following is classroom practices exercise ,using the method of NRV at the point of separation , the further processing costs 159.6 whether are same as ” further process costs” below ?
sales further process
product output s/p value – cost = NRV split off point
x 400 5.00 2,000.00 800.00 1,200.00
y 600 10.00 6,000.00 1,200.00 4,800.00
6,000.00
joint further process cost
cost + cost unit
3,000.00 800.00 =3,800.00 9.50
12,000.00 1,200.00 =13,200.00 22.00
15,000.00If it asks you to use the physical units method, then the selling price and further processing costs are not relevant for splitting the joint costs.
However because the product is not ready for sale when it leaves the process, in order to find its value when it is fully finished we need to take its share of the joint cost (it is then part finished) and then add the further costs of finishing it.
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