Reference no: EM133039319

Problem - 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 liters 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 liter; R, $1.00 per liter. After the additional processing, the selling price of Q is $6.50 per liter, and the selling price of R is $12.00 per liter.

Required -

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

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 sales value method for the allocation of joint costs.

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