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A total of $4000 is allocated into a joint cost to produce 4 different medicine ball products (MB #1, MB #2, MB #3, and MB#4)

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A total of $4000 is allocated into a joint cost to produce 4 different medicine ball products (MB #1, MB #2, MB #3, and MB#4). Each of these products can either be sold at the end of the joint production process, or can be processed further into other medicine balls (MB #5, #6, #7, and/or #8).

 

Production and selling information is as follows:

MB #1 weighs 30 kilograms and the sales value is $100 per kilogram. MB #2 weighs 20 kilograms and the sales value is $50 per kilogram. MB #3 weighs 6 kilograms and the sales value is $2 per kilogram. MB #4 weighs 4 kilograms and the sales value is $0.5 per kilogram.

  

If further processed:

Processing MB #1 further into MB #5 has additional cost of $50, a final weight of 29 kilograms, and a final sales value of $120 per kilogram. Processing MB #2 further into MB #6 has additional cost of $130, a final weight of 15 kilograms, and a final sales value of $200 per kilogram. Processing MB #3 further into MB #7 has additional cost of $120, a final weight of 6 kilograms, and a final sales value of $100 per kilogram. Processing MB #4 further into MB #8 has additional cost of $10, a final weight of 3 kilograms, and a final sales value of $6 per kilogram.

 

 

For example, at the end of the joint production process, there are 30 kg of Product MB #1 produced, and each kg of Product MB #1 sells for $100/kg. The 30kg batch of Product MB #1 can either be sold at this point for $3,000 (30kg x $100/kg) or the batch can be further processed into a batch of Product #5 at an additional cost of $50. This will produce a 29kg batch of Production #5 that sells for $120/kg for a total sales value of $3,480 (29kg x $120/kg).

 

Required:

Part A   Assuming that none of the products are byproducts, calculate the how much of the $4,000 joint cost should be allocated to each product using each of these 4 methods: Net Realization Value, Sales Value at Split-Off, Physical Units, and Constant Gross Margin Net Realizable Value.

 

Part B   Allocate the $4,000 joint cost assuming using the Net Realizable Value method and assuming that product #3, #4, #7, and #8 are all byproducts.