06liter30000 jointprocessing jointprocessing

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Unformatted text preview: become individually identifiable. become individually identifiable. Dr. Hussein Khasharmeh Dr. Hussein Khasharmeh Any costs beyond the split­off point are separable Any costs beyond the split­off point are separable costs because they are not part of the joint process costs because they are not part of the joint process and can be identified with individual product. and can be identified with individual product. Joint costs: are the costs of manufacturing Joint costs: are the costs of manufacturing joint products before the split­off point.. joint products before the split­off point Dr. Hussein Khasharmeh Dr. Hussein Khasharmeh Example, suppose Dow Chemical Company Example, suppose Dow Chemical Company produces two chemical products, X and Y, as a produces two chemical products, X and Y, as a result of a particular joint process. result of a particular joint process. The joint processing cost is $100,000 The joint processing cost is $100,000 (this includes raw­materials cost and (this includes raw­materials cost and processing costs) before the joint products processing costs) before the joint products X and Y reach the split­off point.. X and Y reach the split­off point Both products are sold to the petroleum Both products are sold to the petroleum industry to be used as ingredients of gasoline.. industry to be used as ingredients of gasoline Dr. Hussein Khasharmeh Dr. Hussein Khasharmeh The data for Joint Product Costs are: 1 million liters of X at a 1 million liters of X at a selling price of $.09/liter = $90,000 selling price of $.09/liter = $90,000 500,000 liters of Y at a 500,000 liters of Y at a selling price of $.06/liter = $30,000 selling price of $.06/liter = $30,000 Joint­processing Joint­processing cost is $100,000 cost is $100,000 Sell at split­off point Total sales value at Total sales value at split­off is $120,000 (90,000+30,000)) split­off is $120,000 (90,000+30,000 Dr. Hussein Khasharmeh Dr. Hussein Khasharmeh Illustration of Sell or Process Further Suppose the 500,000 liters of Y can be processed further Suppose the 500,000 liters of Y can be processed further and sold to the plastics industry as product YA. and sold to the plastics industry as product YA. The additional processing cost would be $.08 per liter for The additional processing cost would be $.08 per liter for manufacturing and distribution, a total of $40,000 (500,000 X 0.08). manufacturing and distribution, a total of $40,000 (500,000 X 0.08). The net sales price of YA would be $.16 per liter, a total of The net sales price of YA would be $.16 per liter, a total of $80,000 (500,000 X0.160). Should the company process further $80,000 (500,000 X0.160). Should the company process further product (Y) and then sold it or sell it at split­off point. product (Y) and then sold it or sell it at split­off point. Dr. Hussein Khasharmeh Dr. Hussein Khasharmeh Illustration of Sell or Process Further Sell at Split-off as Y Revenues Revenues Separable costs Separable costs...
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