9 minutes Problem 1) Midwest Clothing produces three products (precut fabrics for hats, shirts,

and pants) from a joint process. Joint cost is allocated on the basis of relative sales value at split-
off. Rather than sell the products at split-off, the company has the option to complete each of the
products. Information related to these products is shown below:
Hats Shirts Pants Total
Number of units produced 5,000 8,000 3,000 16,000
Joint cost allocated P87,000 ? ? P180,000
Sales values at split-off point ? ? P40,000 P300,000
Additional costs of processing further P13,000 P10,000 P39,000 P62,000
Sales values after all processing P150,000 P134,000 P105,000 P389,000
a. What amount of joint cost should be allocated to the Shirts and Pants products?
b. What are the sales values at split-off for Hats and Shirts?
c. Which products should be processed further? Show computations.
d. If 4,000 Shirts are processed further and sold for P67,000, what is gross profit on the sale?

5 minutes Problem 2) Allison, Inc., produces two products, X and Y, in a single joint process. Last
month the joint costs were P75,000 when 10,000 units of Product X and 15,000 units of Product Y
were produced. Additional processing costs were P15,000 for Product X and P10,000 for Product
Y. Product X sells for P10, and Product Y sells for P5.
a.The joint cost allocations to Products X and Y using the net realizable value method would be:
b.The joint cost allocations to Products X and Y using the physical unit’s method would be:
3 minutes Problem 3) Nathan Company produces three products (A, B, and C) in a single joint
process. All of the products are salable immediately upon split-off. Alternatively, any of the
products could be processed further and sold at a higher price. Cost and price information is as
follows:
Product : Price at Split-Off : Additional Processing Cost : Price After Processing : Unit Volume
A P10 P10,000 P12 10,000
B 15 25,000 18 5,000
C 20 50,000 30 8,000
The decision that would maximize profits would be to sell or process further which product?
3 minutes Problem 4) Laker Company produces two products along with a single by-product. The joint
process costs total P200,000. Product A can be sold for P450,000 after additional processing of
P250,000; Product B can be sold for P600,000 after additional processing of P200,000. The by-product
BP can be sold for P25,000 after packaging costs of P5,000. The by-product is accounted for using the
by-product revenue deducted from the main product cost approach. What would be the joint cost
allocation using the net realizable value method for Product A and B?
5 minutes Problem 5) Lankip Company produces two main products and a by-product out of a joint
process. The ratio of output quantities to input quantities of direct material used in the joint process
remains consistent from month to month. Lankip employs the physical units method to allocate joint
production costs to the two main products. The net realizable value of the by-product is used to reduce
the joint production costs before the joint costs are allocated to the main products. Data regarding
Lankip’s operations for the current month are presented below. During the month, Lankip incurred joint
production costs of P2,520,000. The main products are not marketable at the split-off point and, thus,
have to be processed further.
First Main Product Second Main Product By-Product
Monthly output in pounds.......... 90,000 150,000 60,000
Selling price per pound ............. P30 P14 P2.20
Separable process costs .......... P540,000 P660,000 P12,000
The amount of joint production cost that Lankip would allocate to the Second Main Product by using the
Physical Units method and NRV method to allocate joint production costs respectively would be:

5 minutes Problem 6) Petro-Chem, Inc., is a small company that acquires high-grade crude oil from low-
volume production wells owned by individuals and small partnerships. The crude oil is processed in a single
refinery into Two Oil, Six Oil, and impure distillates. Petro-Chem does not have the technology or capacity
to process these products further and sells most of its output each month to major refineries. There were
no beginning inventories for finished goods or work in process on November 1. The production costs and
output of Petro-Chem for November are as follows:
Crude oil acquired and placed in production ................. P5,000,000
Direct labor and related costs ....................................... 2,000,000
Factory overhead ......................................................... 3,000,000
Production and sales:
 Two Oil: 300,000 barrels produced; 80,000 barrels sold at P20 each
 Six Oil: 240,000 barrels produced; 120,000 barrels sold at P30 each
 Distillates: 120,000 barrels produced and sold at P15 per barrel
a. The portion of the joint production costs assigned to Six Oil based on physical output would be:
b. The portion of the joint production costs assigned to Two Oil based on the relative sales value of output
would be:

Prob 7. Granite City Monument Works is a manufacturer of cemetery headstones and architectural granite slabs.
Granite City excavates blocks of granite from its quarry from its joint processes of Quarry and Cutting. Two joint
products (cemetery monuments and architectural granite) are produced along with a by-product called grit.
Cemetery monuments are cut, polished, and engraved in a variety of standard shapes, sizes, and patterns and
sold to funeral homes. Architectural granite slabs are special-ordered by contractors for office buildings. These
slabs are cut and polished to exacting specifications. The small pieces of granite resulting from the cutting
process are crushed and sold to farm-supply outlets as poultry grit.
Granite City has provided the following costs and output information:
Process/Product Cost Tons of Output SV@SO Cost to Sell Final Selling Price
Quarry P350,000 100,000
Cutting 250,000 90,000
 Monuments 300,000 25,000 P25/ton P10/ton P50/ton
Granite slabs 400,000 60,000 P15/ton P7/ton P35/ton
Grit 10,000 5,000 P5/ton
Quarry and Cutting are joint processes. A local farm-supply distributor purchases all of the grit that is produced
at P10 per ton. Assume that Granite City uses the physical unit’s method to allocate joint costs.

Required: (15 minutes)

1. What would be the cost per ton of monuments and granite slabs, assuming that the grit is accounted for
as “Other Income”?
2. What would be the cost per ton of monuments and granite slabs, assuming that the grit is accounted
for as by-product net revenue deducted from the main product cost?
3. What would be the cost per ton of monuments and granite slabs, assuming that the grit is accounted
under reversal cost method with a normal profit margin of 20% and that the main product is accounted
under NRV?

Problem 8. Taldot Company produces three products (X, Y, and Z) in a joint process costing P100,000. The
products can be sold as they leave the process, or they can be processed further and sold. The cost accountant
has provided you with the following information:
Sales Price Separable Further Sales Price After
Product Unit Volume at Split-Off Processing Costs Further Processing
X 3,000 P10 P60,000 P25
Y 4,000 15 50,000 30
Z 8,000 20 90,000 35
Assume that the company allocates joint costs using the net realizable value method.
Determine the unit cost of the product/s that would be process further by Taldot in order to maximize the profit.
Determine the unit cost of the products that will maximize the profit.
Problem 9. St. Louis Bank & Trust has two main service lines: commercial checking and credit cards. As a by-product
of these two main services, the firm also generates some revenue from selling antitheft and embezzlement insurance.
Joint costs for producing the two main services include expenses for facilities, legal support, equipment, record
keeping, and administration. The joint service cost incurred during June 2015 was P800,000. These costs are to be
allocated on the basis of total revenues generated from each main service.
The following table presents the results of operations and revenues for June:
Service Number of Accounts Total Revenues
Commercial checking 3,000 P 1,897,500
Credit cards 7,000 1,402,500
Theft insurance 6,500 65,000
Management accounts for the theft insurance on a realized value basis. When commissions on theft insurance are
received, management has elected to present the proceeds as a reduction in the Cost of Services Rendered for the
main services.
Separate costs for the two main services for June were P250,000 and P180,000, respectively, for checking accounts
and credit cards.
Determine the income for each main service and the company’s overall gross margin for June 2015.