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MANAGERIAL AND COST ACCOUNTINGMATZ, USRY AND HAMMER9 th EDITION

CHAPTER 6 - COSTING BY-PRODUCTS AND JOINT PRODUCTSEXERCISE 1

REQUIRED

1) Accounts ReceivableIncome from sales of by product

( By product sold without incurring additional cost 80,000 poundsfor $ 0.36 per pound )

2) Finished goodsBy product

Work in process - Okay( By product transferred to finished goods and reducing the mainproduct cost by 80,000 pounds X $ 0.36 per pound )

3) Work in process By productPayrollApplied Factory overheadMaterial

( Further processing of By product accounting for material, labourand factory overhead after separation )

Finished goodsBy product

Work in process By product( By product transferred to finished goods after processing )

4) Work in process By productWork in process Okay (see working below)PayrollApplied Factory overheadMaterial

( Further processing of By product accounting for materail, labourand factory overhead and allocation of joint cost by the market value method )

Finished goods

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By productWork in process By product

( By product transferred to finished goods after processing )

WORKING FOR JOURNAL ENTRY 4Product Units

Okay 315,000By product 80,000

%age to allocate cost prior to separation = ($ 250,000+$200,000+$170,000) / $ 658,800

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Subsidiary Ledger General LedgerDebit / (Credit) Debit Credit

$ $ $

28,80028,800

28,80028800

28,800

20,0006,0004,000

10,000

20,00020,000

20,000

47,10427,104

6,0004,000

10,000

47,104

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47,104 47,104

Per unit market Total market Allocation of value at point of value at point of cost prior to

separation separation separation$ $ $

2.00 630,000 592,8960.36 28,800 27,104

658,800 620,000

$ 620,000 / $ 658,800 = 94.1105%