Gem Potato Processors – Joint Costs
Gem Potato Processors produces three products: fries, nuggets and crunchy peels. They are all made from a cull potatoes they purchase from sorting sheds. Follow is information about each product.
Fries Nuggets Peelings
Pounds Produced 50,000 40,000 10,000
Pounds Sold at Retail Point 45,000 35,000 10,000
Sales Price at Split-off $3.00 $2.00 $1.00
Retail Sales Price $5.00 $4.00 $1.00
Separate Costs $50,000 $20,000 $0
Joint Costs before Split-off Point is $200,000.
Required:
- Allocate the joint costs using the NRV method.
- Allocate the joint costs using the physical units method.
- What is the other acceptable method used to allocate joint costs?
- Which is the best method and why?
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