Reference no: EM132715894

Shaffner Corporation produces three products, Alpha, Beta and Gamma. Alpha and Gamma are joint products; Beta is a by-product of Alpha No joint cost is to be allocated to the by-product. The production processes for a given year are as follows:

a. In Department 1, 110,000 pounds of material Rho (raw materials) are processed, at a total cost of P120,000. After processing, 60% of units are transferred to Department 2, and 40% of the units (now Gamma) are transferred to Department 3.

b. In Department 2, the material is further processed at a total additional cost of P38,000. Seventy percent of the units (now Alpha) are transferred to Department 4 and 30% emerge as Beta, the by-product, to be sold at P1.20 per pound. The marketing expense related to Beta is P8,100.

c. In Department 4, Alpha is processed at a total additional cost of P23,660. After processing, Alpha is ready for sale at P5 per pound.

d. In Department 3, Gamma is processed at a total additional cost of P165,000. In this department, a normal loss of units of Gamma occurs, which equals 10% of the good output of Gamma. The remaining good output is sold for P12 per pound.

Required:

Problem 1: Using the market value at split-off point and treating the net realizable value of Beta as an addition to the sales value of Alpha, determine the amount of joint costs to be allocated between the two joint products, Alpha and Gamma.