Question:
Net Realizable Value of Joint Products
Toledo Chemical Company buys A-123 for $2.40 a gallon. At the end of distilling in Department 1, A-123 splits off into three products: B-1, B-2, and B-3. Toledo sells B-1 at the split-off point, with no further processing; it processes B-2 and B-3 further before they can be sold. B-2 is fused in Department 2, and B-3 is solidified in Department 3. Following is a summary of costs and other related data for the year ended June 30.
|
Department
|
(1) Distilling
|
(2) Fusing
|
(3) Solidifying
|
|
Cost of A-123
|
$288,000
|
-0-
|
-0-
|
|
Direct labor
|
72,000
|
$135,000
|
$195,000
|
|
Manufacturing overhead
|
60,000
|
63,000
|
162,000
|
|
Products
|
B-1
|
B-2
|
B-3
|
|
Gallons sold
|
45,000
|
90,000
|
135,000
|
|
Gallons on hand at year-end
|
30,000
|
-0-
|
45,000
|
|
Sales
|
$90,000
|
$288,000
|
$425,250
|
Toledo had no beginning inventories on hand at July 1 and no A-123 on hand at the end of the year on June 30. All gallons on hand on June 30 were complete as to processing. Toledo uses the net realizable value method to allocate joint costs.
Required
Compute the following:
a. The net realizable value of B-1 for the year ended June 30.
b. The joint costs for the year ended June 30 to be allocated.
c. The cost of B-2 sold for the year ended June 30.
d. The value of the ending inventory for B-1.