Page 44 - P1 Integrated Workbook STUDENT 2018
P. 44
Chapter 3
Example 2
The organisation is considering further processing each product. This would
provide the following:
Extra fixed costs Existing variable Revised selling
cost per unit price per kg
Product A $280 $2.00 $8.40
Product B $160 $1.40 $4.50
Allocate the joint costs between the products on the basis of the net
realisable value of each product.
Solution
Product A Product B Total
Revenue: $ $ $
Product A: 100 × $8.40 840
Product B: 200 × $4.50 900
Extra costs:
Product A: (100 × $2.00) + $280 480
Product B: (200 × $1.40) + $160 440
Net realisable value 360 460 820
Share of joint costs:
Product A: $360/$820 × $750 = $329.27 = $3.29/kg
Product B: $460/$820 × $750 = $420.73 = $2.10/kg
Illustrations and further practice
Now try example 1 from Chapter 3.
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