Hardahl Chemical produces thc. Approximated net realizable values at split-off.ree joint products and one by-product. The following information is available for September 2008:Sales Value at Cost after Final Selling Product Gallons Split-Off per gallon Split-Off Price Jp-4539 4,000 $12 $3 $21 JP-4587 16,000 8 5 14 JP-4591 12,000 15 2 19 Allocate the joint cost of $465,000 to the production on the a.Number of gallons; b. Sales value at split-off;
To allocate the joint cost of $465,000, we can use two different methods: the number of gallons method and the sales value at split-off method.
a) Allocating the joint cost based on the number of gallons:
Step 1: Calculate the total number of gallons produced for all joint products and the by-product.
Total gallons = Gallons of JP-4539 + Gallons of JP-4587 + Gallons of JP-4591 + Gallons of by-product
Total gallons = 4,000 + 16,000 + 12,000 + ?? (not provided)
Since the gallons of the by-product are not provided, we should assume it as 0 for this calculation.
Total gallons = 4,000 + 16,000 + 12,000 + 0 = 32,000 gallons
Step 2: Calculate the allocation rate per gallon.
Allocation rate per gallon = Joint cost / Total gallons
Allocation rate per gallon = $465,000 / 32,000 gallons
Allocation rate per gallon ≈ $14.53 per gallon
Step 3: Allocate the joint cost for each product and the by-product.
Joint cost allocated to JP-4539 = Gallons of JP-4539 * Allocation rate per gallon
Joint cost allocated to JP-4587 = Gallons of JP-4587 * Allocation rate per gallon
Joint cost allocated to JP-4591 = Gallons of JP-4591 * Allocation rate per gallon
b) Allocating the joint cost based on the sales value at split-off:
Step 1: Calculate the total sales value at split-off for all joint products.
Total sales value at split-off = (Gallons of JP-4539 * Split-off price of JP-4539) + (Gallons of JP-4587 * Split-off price of JP-4587) + (Gallons of JP-4591 * Split-off price of JP-4591)
Total sales value at split-off = (4,000 * $3) + (16,000 * $5) + (12,000 * $2)
Total sales value at split-off = $12,000 + $80,000 + $24,000
Total sales value at split-off = $116,000
Step 2: Calculate the allocation rate based on the sales value at split-off.
Allocation rate based on sales value at split-off = Joint cost / Total sales value at split-off
Allocation rate based on sales value at split-off = $465,000 / $116,000
Allocation rate based on sales value at split-off ≈ $4.01 per dollar of sales value
Step 3: Allocate the joint cost for each product and the by-product.
Joint cost allocated to JP-4539 = Sales value at split-off of JP-4539 * Allocation rate based on sales value at split-off
Joint cost allocated to JP-4587 = Sales value at split-off of JP-4587 * Allocation rate based on sales value at split-off
Joint cost allocated to JP-4591 = Sales value at split-off of JP-4591 * Allocation rate based on sales value at split-off
Note: The allocation of joint cost to the by-product is usually based on its net realizable value and is allocated last when using the sales value at split-off method. However, since the net realizable value of the by-product is not provided, we cannot allocate the joint cost for the by-product in this calculation.