Homework SourseBowen Company makes two products from a joint production pro
Bowen Company makes two products from a joint production process. Each product may be sold at the split-off point or processed further and then sold. Information concerning these products for last year is given below: Product X Product Y Allocated joint costs .................... $25,000 $19,000 Sales value after further processing ..... $41,000 $47,000 Sales value at the split-off point ....... $28,000 $23,000 Additional processing costs .............. $16,000 $19,000 Assume that Bowen Company makes all the correct sell or process further decisions. Calculate the net income reported by Bowen Company last year.
Solution
First let us analyse whether each product will be sold at split off point or further processed:
Now, product x will be sold off without further processing and product y will be further processed.
Net income reported will be:
| Product X | Product Y | |
| Sale value at split off point | $28,000 | $23,000 |
| Less; allocated joint cost | ($25,000) | ($19,000) |
| net income if sold at splitoff point | $3,000 | $4,000 |
| Sale value after further processing | $41,000 | $47,000 |
| Total cost (joint cost + additional processing cost)(16,000+25,000) (19,000+19,000) | (41,000) | (38,000) |
| net income if sold after further processing | nil | 9,000 |
