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Exercise 7.26 (Algorithmic)
Sales-Value-at-Split-off Method
Alomar Company manufactures four products from a joint production process: barlon, selene, plicene, and corsol. The joint costs for one batch are as follows:
| Direct materials | $60,000 |
| Direct labor | 34,000 |
| Overhead | 26,000 |
At the split-off point, a batch yields 1,800 barlon, 2,300 selene, 2,200 plicene, and 3,900 corsol. All products are sold at the split-off point: barlon sells for $15 per unit, selene sells for $24 per unit, plicene sells for $26 per unit, and corsol sells for $36 per unit.
Required:
Allocate the joint costs using the sales-value-at-split-off method. If required, round allocation rates to four decimal places and round the final allocations to the nearest dollar.
| Allocated Joint Cost | ||
| Barlon | $ | |
| Selene | $ | |
| Plicene | $ | |
| Corsol | $ | |
| Total | $ | |
(Note: The total of the allocated cost may not equal actual total costs to due to rounding.)
Expert Answer
| Calculation of sale value at split off point | ||||||||
| Products | Yield at split off point (in units) | Sale rate per unit at split off point | Sale Value | |||||
| Barlon | 1800 | $15.00 | $27,000 | |||||
| Selene | 2300 | $24.00 | $55,200 | |||||
| Plicene | 2200 | $26.00 | $57,200 | |||||
| Corsol | 3900 | $36.00 | $140,400 | |||||
| Allocation of joint costs using the sales-value-at-split-off method | ||||||||
| Products | Cost formula | Allocated costs | ||||||
| Barlon | = $120000*$27000/$279800 | $11,580 | ||||||
| Selene | = $120000*$55200/$279800 | $23,674 | ||||||
| Plicene | = $120000*$57200/$279800 | $24,532 | ||||||
| Corsol | = $120000*$140400/$279800 | $60,214 | ||||||
| Total Joint costs = $60000+$34000+$26000 = $120000 | ||||||||
| Sale value at spli off ratio for 4 products is | ||||||||
| Cost allocation formula = Total Joint cost * Sale value of product / Total sale value of all products | ||||||||
