Given:
Syrup Sugar Total
Units produced 20,000 1,000 21,000
Unit selling price $15.00 $2.00
Total process costs: After split-off $12,000 $280 $12,280 Joint costs $100,000
a. Calculate the cost of the syrup if the sugar is considered a by-product and the gross margin from its sale is considered to be a reduction of syrup costs.
Products Sales Value Costs beyond split-off Difference Joint costs allocation
Syrup $300,000 12,000 288,000 $99,406
Sugar $2,000 280 1,720 $594 $289,720
Calculation:
288,000 x 100,000 = 99,406
289,720
1,720 x 100,000 = 594
289,720
Syrup Sugar
Joint costs 99,406/20,000 = $4.97 594/1,000 = $0.59
Costs beyond split-off 12,000/20,000 = $0.6 280/1,000 = $0.28 Unit Cost $5.57 $0.87
a. Answer: The cost of syrup is $4.70/unit if the sugar is considered a by-product and the gross margin from its sale is considered to be a reduction of syrup costs.
b. Calculate product costs assuming this company decided to make and sell as much maple sugar as possible after filling all syrup orders (i.e., it regarded syrup and sugar as joint products). Use the sales value method.
Products Sales Value Costs beyond split-off Difference Joint costs allocation
Syrup $300,000 12,000 288,000 $99,406
Sugar $2,000 280 1,720 $594 $289,720
Calculation:
288,000 x 100,000 = 99,406
289,720
1,720 x 100,000 = 594
289,720
Syrup Production Sugar Production
Joint costs 99,406 594
Costs beyond split-off 12,000 280
Production Cost $111,406 $874
TOTAL PRODUCTION COST