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Dear John,
I have the following problem to solve. The question ask to solve by physical units method but I don’t understand the answer given in my book – after splitting the costs to all 750,000 units, is added also, for product H the amount of 66,000 $. I don’t know why, because the problem syas that the cost is already included in the amount of 350,000 $.
Here is the problem:
Product G & H are joint products. G can be sold immediately after split-off and H requires further processing into products HH before being sold.
Total joint production costs is 350,000 $
Further processing costs of H products are 66,000$Products G – production units = 420,000 and closing inventory = 20,000
Products HH – production units = 330,000 and closing inventory = 30,000Using the psysical units method, what is the cost value of closing inventory for products HH.
Please help with an answer. Thank you
The question as you have typed it does not say that the 66,000 is included in the 350,000.
The 350,000 is the cost of the joint processing and therefore has to be split between the products. The 66,000 is the cost of further processing – it is not a joint cost and applies only to product H (to turn it into HH).
Ok. I understand now. I did a wrong supposition. Thanks very much for clarification.
Have a nice day.
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