Question

Butterfly Corp. manufactures products M1 and M2 from a joint process, which also yields a by-product, B1. Butterfly accounts for the revenues from its by-product sales as other income. Additional information follows: M1 M2 B1 Total Units produced 28,200 13,100 9,900 51,200 Allocated joint costs ? ? ? $ 373,000 Sales value at split-off $ 402,000 $ 268,000 $ 93,000 $ 763,000 Required: Assuming that joint product costs are allocated using the net realizable value at split-off approach, what was the joint cost allocated to product M1?

Answer 1

Answer:

M1 allocated joint cost is $196,521.63  

Explanation:

In calculating the joint cost allocated to product M1, the formula below comes handy:

M1 allocated joint cost=M1 net realizable value/total realizable value*total joint costs

Note that net realizable value id the selling price less further to  make the sales,since there is no further costs to be incurred in making the sale, the selling price ultimately is the net realizable value.

M1 net realizable value is $402,000

total realizable value is $763,000

total joint cost is $373,000

M1 allocated joint cost=$402,000/$763,000*$373,000

M1 allocated joint cost= $196,521.63