Acc561 Introduction to Management Accounting: 12-36 Hernandez Chemical Company’s production process

Acc561 Introduction to Management Accounting 12-36 Joint Costs and Process Map Hernandez Chemical Company’s production process for two of its solvents can be diagrammed using a process map as shown in Exhibit 12-25. The cost of the joint input, including processing costs before the split-off point, is $400,000. Solvent A can be sold at the split-off point for $20 per gallon and solvent B for $60 per gallon. Costs Indirect materials (Pounds) 55,000 Base materials (gallons) 220,000 Processing machine (machine hours) 80,000 Labor (labor hours) 45,000 Total Costs $400,000 at split-off point: Yield Selling Price Solvent A 20,000 $20 Solvent B 10,000 $60 Total 30,000 1. Allocate the $400,000 joint cost to solvents A and B by the physical-units method. 2. Allocate the $400,000 joint cost to solvents A and B by the relative-sales-value method.
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