Problem:

A company makes 2 different types of product, A and B, from a joint process. A production run costs $20,000 and results in 500 units of A and 2,000 of B. Both products must be processed past the split-off point, incurring separable cost for A of $5 per unit and for B of $10 per unit. The market price for A is $25 and for B is $20.

Required:

Question 1: What is the total cost per unit for A and B, assuming that joint costs are allocated using the NET REALIZABLE VALUE method?

Question 2: What is the total cost per unit for A and B, assuming that joint costs are allocated using the PHYSICAL UNITS method?

Question 3: What is the total cost per unit for A and B, assuming that joint costs are allocated using the FINAL SALES VALUE method?

Question 4: If A can be sold for $15 at split-off, should it be then or processed further? Justify your answer with number.

Note: Please show how you came up with the solution.