Reference no: EM132824984

Thomas Company, a new firm, manufactures two products, Q and R, in a common process. The joint costs amount to $42,000 per batch of finished goods. Each batch results in 10,000 litres of output, of which 70% are Q and 30% are R. The unit selling price for Q is $4 and for R is $8 at the split-off point.

• However, the two products are processed beyond the split-off point, with Thomas incurring the following separable costs: Q, $0.50 per litre; R, $1.00 per litre. After the additional processing, the selling price of Q is $6.50 per litre, and the selling price of R is $12.00 per litre.

Required:

Problem A. Determine the proper allocation of joint costs if the company uses the sales value method.

Problem B. Assume that Thomas sold all of its production of Q and R during the current accounting period. Compute Thomas 's final net profit (loss) assuming again that the company uses the physical method for the allocation of joint costs.

Problem C. Assume that Thomas sold all of its production of Q and R during the current accounting period. Compute Thomas 's incremental net profit.