Question & Answer: Exercise 7.26 (Algorithmic) Sales-Value-at-Split-off Method…..

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:

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Question & Answer: Exercise 7.26 (Algorithmic) Sales-Value-at-Split-off Method…..
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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

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