Service Department Cost Allocation - Anna Lee

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By-products – Method 1Carlyle Coal CompanyFor the Month of MarchHi-GradeLo-GradeDustby-productTotalSales valueLess: Additional processing costsNet realizable value at split-off pointDeduct: Sales value of by-product aAllocated remaining joint costs aGross marginGross margin as a percent of sales$300,000-0-$300,000-0-102,000 b$198,00066%$450,000-0-$450,000-0-153,000 c$297,00066%$15,000-0-$15,00015,000-0--0-0%$765,000-0-$765,00015,000255,000$495,00065%a Note: Joint costs adjusted for sales value of by-product (dust) (765,000 – 15,000 = 750,000)b($300,000 ÷ $750,000) or 40% × ($270,000 Joint cost – $15,000)c($450,000 ÷ $750,000) or 60% × ($270,000 – $15,000)11 - 30
Carlyle Coal CompanyFor the Month of MarchQuantity (tons)Sales value<strong>Allocation</strong> of joint costsGross marginGross margin as a percent of sales15,000$300,000108,000$192,00064%30,000$450,000162,000$288,00064%45,000$750,000270,000$480,00064%(300,000÷ 750,000) = 40% 270,000 x 40% = 108,000(450,000÷ 750,000) = 60% 270,000 x 60% = 162,000
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 and 28: Physical Quantities Method• Joint
Page 29: By-products• By-products are outp
Page 33 and 34: Sell or Process Further• Suppose

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