Service Department Cost Allocation - Anna Lee

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Physical Quantities MethodCarlyle Coal CompanyFor the Month of MarchQuantity (tons)Sales value<strong>Allocation</strong> of joint costsGross marginGross margin as a percent of salesHi-Grade Lo-Grade Total15,000$300,00090,000 a$210,00070%30,000$450,000180,000 b$270,00060%45,000$750,000270,000$480,00064%a(15,000 tons ÷ 45,000 tons) × $270,000b(30,000 tons ÷ 45,000 tons) × $270,00011 - 28
By-products• By-products are outputs of joint production processesthat are relatively minor in quantity or value. Joint costsare usually not allocated to a by-product, instead,market value of by-product is reported as follows:• Method 1:The net realizable value from sale of the by-productsis deducted from the joint costs (as a contra productioncost) before allocation to the main products.• Method 2:The proceeds from sale of the by-product are treatedas other revenue (other income).11 - 29
Page 2: LO1Service Department Cost Allocati
Page 5 and 6: Cost Allocation: Direct Method• D
Page 7 and 8: Cost Allocation: Step Method• The
Page 9 and 10: LO3Cost Allocation: Step MethodServ
Page 11 and 12: Cost Allocation: Reciprocal Method
Page 13 and 14: LO4Cost Allocation: Reciprocal Meth
Page 19 and 20: LO5The Reciprocal Methodand Decisio
Page 21 and 22: Allocation of Joint CostsJoint cost
Page 23 and 24: Net Realizable Value MethodFinal sa
Page 25 and 26: Estimating NRV• When no sales val
Page 27: Physical Quantities Method• Joint
Page 31 and 32: Carlyle Coal CompanyFor the Month o
Page 33 and 34: Sell or Process Further• Suppose

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