Scribd
Upload
73 views4 pages

Sales Value Analysis at Split-off

This document contains information about allocating a joint processing cost of $1,020,000 among three joint products: studs, decorative pieces, and posts. It considers three allocation methods: the split-off method allocates costs based on the sales value of each product; the physical-measure method allocates costs based on the units produced of each product; and the net realizable value method allocates costs based on the contribution of each product after further processing costs. The document also provides requirements to calculate the decrease in profit if decorative pieces are further processed, and potential impacts and management strategies if a plant closure is announced 6 months in advance.

Uploaded by

Kyle Bacani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
73 views4 pages

Sales Value Analysis at Split-off

This document contains information about allocating a joint processing cost of $1,020,000 among three joint products: studs, decorative pieces, and posts. It considers three allocation methods: the split-off method allocates costs based on the sales value of each product; the physical-measure method allocates costs based on the units produced of each product; and the net realizable value method allocates costs based on the contribution of each product after further processing costs. The document also provides requirements to calculate the decrease in profit if decorative pieces are further processed, and potential impacts and management strategies if a plant closure is announced 6 months in advance.

Uploaded by

Kyle Bacani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

PROBLEM 16-30

REQUIREMENT 1
JOINT PROCESSING COST $ 1,020,000.00

A. Sales value @ Split-off Method

Units produced SP/unit Sales value Proportion


Studs 82,000.00 $ 6.00 $ 492,000.00 53%
Decorative Pieces 2,000.00 $ 70.00 $ 140,000.00 15%
Posts 18,000.00 $ 16.00 $ 288,000.00 31%
102,000.00 $ 92.00 $ 920,000.00 100%

B. Physical-measure Method

Units produced Proportion Allocated Joint Cost


Studs 82,000.00 80% $ 820,000.00
Decorative Pieces 2,000.00 2% $ 20,000.00
Posts 18,000.00 18% $ 180,000.00
102,000.00 100% $ 1,020,000.00

C. NRV Method
Fully-processed Sales
Units produced SP/Unit value Further processing Cost
Studs 82,000 $ 6.00 $ 492,000.00 $ -
Decorative Pieces 1,800 $ 110.00 $ 198,000.00 $ 110,000.00
Posts 18,000 $ 16.00 $ 288,000.00 $ -
101,800 $ 132.00 $ 978,000.00 $ 110,000.00

Decorative pieces if not further processed 2,000


Spoilage 200
Decorative pieces if not further processed 1,800

REQUIREMENT 2
For Decorative Pieces:
Units Sales Price per Unit
Revenue with planing and sizing process 1,800 $ 110.00
Less: Revenue without planing and sizing process 2,000 $ 70.00
Incremental Revenue
Incremental Revenue $ 58,000.00
Incremental Cost $ (110,000.00)
Net decrease in Profit if processed further $ (52,000.00)

REQUIREMENT 3
Upon the 6-month early notice of the action to be made by the management, the following might occur:
a. Workers might reduce their efforts in producing the product because of low morale.
b. Lower quality of products will be made.
c. Workers loyalty to the company diminishes and might result in slack time looking for other jobs.

Management may influence such outcome by:


a. Providing incentive schemes with the workers so as not to reduce quality of work.
b. Relocating the workers and thus offering them perhaps a different job.
c. Disseminate understandable information to workers to why such action needs to be taken.
Allocated Joint Cost
$ 545,478.26
$ 155,217.39
$ 319,304.35
$ 1,020,000.00

Net Realizable Value Proportion Allocated Joint Cost


$ 492,000.00 57% $ 578,156.68
$ 88,000.00 10% $ 103,410.14
$ 288,000.00 33% $ 338,433.18
$ 868,000.00 100% $ 1,020,000.00

Revenue
$ 198,000.00
$ 140,000.00
$ 58,000.00
g might occur:

ng for other jobs.

o be taken.

You might also like