What is the total net realizable value of protein drinks used to reduce the joint cost assigned to…


Question Description:

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(Process costing; joint cost allocation; by-product) Get Ahead pro-vides personal training services for, and sells apparel products to, its clients. Get Ahead also generates a limited amount of revenue from the sale of protein drinks. The net realizable value from drink sales is accounted for as a reduction in the joint cost assigned to the Personal Training Services and Apparel Products. Protein drinks sell for $2.50 per bottle. The costs associated with making and packaging the drinks are $1.00 per bottle. The following information is available for 2010 on apparel products, which are purchased by Get Ahead: Beginning inventory $ 35,000 Ending inventory 21,500 Purchases 181,350 Joint cost is to be allocated to Personal Training Services and Apparel Products based on approximated net realizable values. For 2010, total revenues were $753,000 from Personal Training Services and $289,000 from Apparel. The following joint costs were incurred: Rent $36,000 Insurance 43,750 Utilities 3,000 Separate costs were as follows: Personal Training Apparel Labor $231,000 $33,250 Supplies 151,300 700 Equipment depreciation 165,000 1,200 Administration 103,000 3,700 For the year, 2,500 bottles of protein drinks were sold. a. What is the total net realizable value of protein drinks used to reduce the joint cost assigned to Personal Training and Apparel? b. What is the joint cost to be allocated to Personal Training and Apparel? c. What is the approximated pre-tax realizable value of each main product or service for 2010? d. How much joint cost is allocated to each main product or service? e. Determine the net income produced by each main product or service.

Answer

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