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Allocation of Cost to by-Product Z by Reversal Cost Method
Operating Profit per unit 1
 Add: Operating Expenses:
Marketing and Administrative expenses per unit 1GROSS PROFIT per unit 2Sales price per unit 5Less: Gross profit per unit (2)COST OF GOODS SOLD per unit 3Less: Further processing cost per unit (1)COST OF GOODS SOLD per unit(at split off point) 2
C
 
ost of Z Product = 2,000 units x Rs. 2 = Rs 4,000ALLOCATION OF JOINT PRODUCT COST TO X and Y (by Market value method.
Product Ultimate Nos. of Ultimate Processing cost HypotheticalMV / unit units Market Market valueproduced PriceX 20 8,000 160,000 40,000 120,000Y 25 10,000 250,000 70,000 180,000300,000Allocation of Joint Production Cost to X and Y is now Rs. 200,because Rs. 4,000 charged to Product Z which deduct from tocost of Rs. 204,000
 
Allocation Allocation of % Joint cost40 80,00060 120,000200,00000al
 
Required no. 1: Market Value method
Product Units Sales price Total Market Value Allocationper unit %Buildon 6,000 2.20 13,200 36.67Buildeze 8,000 1.25 10,000 27.78Buildrite 10,000 1.28 12,800 35.5636,000 100
Required no. 2: Weighted Average method
Product Units Weight Weighted Allocationper unit Units %Buildon 6,000 6 36,000 33.33Buildeze 8,000 4 32,000 29.63Buildrite 10,000 4 40,000 37.04108,000 100
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