Work in process would have been understated Finished goods would have been

# Work in process would have been understated finished

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Work in process would have been understated. Finished goods would have been overstated.
11-35Net Realizable Value Method To Solve For Unknowns: GG Products, Inc. Since the sales value of each product at the split-off point is available, the appropriate basis for allocation using the net realizable value method is \$78,750 (which is \$63,000 + \$15,750). Let TC equal the unknown total costs. The allocation of \$36,000 to tips must have been the result of the allocation equation: \$63,000 x TC = \$36,000 \$63,000 + \$15,750 So, solving for TC, we obtain: \$63,000 x TC = \$36,000 \$63,000 + \$15,750 0.80 x TC = \$36,000 TC = \$45,000 11-38Net Realizable Value Method: Douglas Company. The net realizable value method is a cost allocation method that allocates joint costs in proportion to the net realizable value of the individual products. The calculation is: Net Realizable Value at Split-Off (\$000) Allocation Joint Costs Allocated W-10 \$210 (210 ÷ 600) x \$240,000 \$84,000 W-20 180 (180 ÷ 600) x 240,000 72,000 W-30 120 (120 ÷ 600) x 240,000 48,000 W-40 90 (90 ÷ 600) x 240,000 36,000 \$600 \$240,000 Note: The costs incurred after split-off are not joint costs and are therefore not included.
11-39Physical Quantities Method: Kyle Company. a. Total units of KA ..................= 56,000 units Total units produced ............= 112,000 units Joint product costs ..............= \$126,000 Amount allocated from joint costs: 56,000 x \$126,000 = \$63,000 112,000 Additional processing costs36,000 Total costs of Product KA \$99,000 b. Net realizable value of KB at split-off .........= \$140,000 Total net realizable value at split-off ..........= 400,000 Joint product costs ....................................= 126,000 Amount allocated from joint costs: \$140,000 x \$126,000 = \$44,100 \$400,000 Additional processing costs 28,000 Total costs allocated to KB \$72,100 11-48Allocate Service Department Costs: Not-A-Mega Bank a. \$140,000 \$140,000 = 140 x \$240,000 (140 + 100) b. \$70,000 \$70,000 = 218,750 x \$160,000 (281,250 + 218,750)
c. \$5,856 \$5,856 = 9,600 x \$203,200 (3,500 + 9,600 + 176,000 + 144,000) d. \$0. There is no allocation of costs back to the department after costs have been allocated from it. Facilities costs have already been allocated from it to other departments. 11-53Net Realizable Value of Joint Products: Toledo Chemical Company a. \$150,000 Since there is no further processing for B-1 after split-off, the net realizable value is simply the sales value of allunits produced. Price per unit = \$90,000 = \$2.00 45,000 units sold Units produced = 75,000 units (= 45,000 sold + 30,000 in ending inventory). Total net realizable value = \$150,000 (= 75,000 units x \$2.00) b. \$420,000. The joint costs to be allocated are all costs up to split-off, that is, all costs in Department 1. Cost of A-123\$288,000 Direct labor 72,000 Overhead 60,000 Total \$420,000
11-53. (continued) c. \$282,000. Net realizable value of B-1 \$150,000aNet realizable value of B-2 90,000bNet realizable value of B-3 210,000cTotal \$450,000 a From requirement a. b \$288,000 \$135,000 \$63,000 = \$90,000 c \$425,250 x 180,000 units \$195,000 \$162,000 = \$210,000 135,000 units Allocation of joint costs to B-2: \$90,000 x \$420,000 = \$84,000 \$450,000 Additional processing costs: Direct labor 135,000 Overhead 63,000 Total cost of B-2 \$282,000 d. \$56,000. Using information from c above, the allocation to B-1 is: \$150,000 x \$420,000 = \$140,000 \$450,000 Cost per unit = \$140,000 ÷ 75,000 units produced = \$1.867/unit Cost of ending inventory: 30,000 units x \$1.867 = \$56,000 (adjusted for rounding)
11-55Find Missing DataNet Realizable Value: Athens, Inc. Athens must be using the net realizable value method because the ratio of argon’s joint costs to the total does not equal the ratio of argon’s physical units to the total.
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