Question

Euclid Corporation processes a patented chemical, P-1, and produces two outputs, P-11 and P-12. In August, the costs to process P-1 are $165,000 for materials and $270,000 for conversion costs. P-11 has a sales value of $648,000 and P-12 has a sales value of $162,000. Required Using the net realizable value method, assign costs to P-11 and P-12 for August.

Answer 1

Answer:

$348,000 and $87,000

Explanation:

According to the scenario, computation of the given data are as follow:-

We can calculate the assign cost for august by using following formula:-

Total Joint Cost = P1 Material Cost + P1 Conversion Cost

= $165,000 + $270,000

= $435,000

Cost Assigned to P11

= Sales Value of P11 ÷ (Sales Value of P11 + Sales Value of P12) × Total Joint Cost

= $648,000 ÷ ($648,000 + $162,000) × $435,000

= $648,000 ÷ $810,000 × $435,000

= 0.8 × $435,000

= $348,000

Cost Assigned to P12

= Sales Value of P12 ÷ (Sales Value of P11 + Sales Value of P12) × Total Joint Cost

= $162,000 ÷ ($648,000 + $162,000) × $435,000

= $162,000 ÷ $810,000 × $435,000

= 0.2 × $435,000

= $87,000

The joint cost is the cost of two or more products to make a single product. It includes the product cost like direct material, direct labor, etc