Reference no: EM132796263

Qayqayt Paper Products Inc. processes wood pulp into two products. During January the joint costs of processing were $144,000. Production and sales value information for the month were as follows:

                                               Sales Value at
Product            Kilograms Produced            Split off Point                       Separable Costs
Paper                    130,000                              $80,000                         $224,000
Basic Cardboard        108,000                                   70,000                      264,000

Paper sells for $2.75 a kilogram and cardboard sells for $3.50 a kilogram. There were no beginning inventories for April but ending inventories totalled 10,000 kilograms for paper and 12,000 kilograms for cardboard.

Problem 1: Allocate the joint (common) costs to both product groups and prepare product line operating income statement using the Net Realizable value method