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21 July, 20:55

Tempe Inc. produces two products-Basic and Fancy-by a joint process. The company incurred joint costs of $200,000. The company has gathered the following information: Basic Fancy Units produced 30,000 20,000 Sales price $25 $35 Units sold 20,000 18,000 Beginning Inventory 0 0 Determine the value of ending inventory for Basic and Fancy using the sales value at splitoff method.

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  1. 22 July, 00:15
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    Basic ending inventory = $27,777.78

    Fancy ending inventory = $11,666.67

    Explanation:

    Basic Fancy

    Units produced 30,000 20,000

    Sales price $25 $35

    Units sold 20,000 18,000

    Beginning Inventory 0 0

    joint costs incurred = $200,000

    The sales value at splitoff method allocates joint costs based on the products' prices.

    Basic is allocated $25 / ($25 + $60) = 41.67% x $200,000 = $83,333.33 of joint costs. Production cost per unit = $83,333.33 / 30,000 = $2.78.

    Ending inventory = (30,000 - 20,000) x $2.7778 = $27,777.78

    Fancy is allocated $35 / ($25 + $60) = 58.33% x $200,000 = $116,666.67 of joint costs. Production cost per unit = $116,666.67 / 20,000 = $5.83333.

    Ending inventory = (20,000 - 18,000) x $5.83333 = $11,666.67
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