Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned tomatoes. During the summer of 20×3, the joint costs of processing the tomatoes were $420,000. There was no beginning or ending inventories for the summer. Production and sales value information for the summer were as follows:
| Product | Cases | Sales Value
at Splitoff Point |
Separable Costs | Selling Price |
| Catsup | 100,000 | $6 per case | $3.00 per case | $28 per case |
| Juice | 150,000 | 8 per case | 5.00 per case | 25 per case |
| Canned | 200,000 | 5 per case | 2.50 per case | 10 per case |
Required:
Determine the amount allocated to each product if the estimated net realizable value method is used, and compute the cost per case for each product.
Answer:
| Product | Expected
Sales Value |
Separable
Costs |
Net Realizable
Value |
Percentage |
| Catsup | $2,800,000 | $300,000 | $2,500,000 | 35.71% |
| Juice | 3,750,000 | 750,000 | 3,000,000 | 42.86% |
| Canned | 2,000,000 | 500,000 | 1,500,000 | 21.43% |
| Totals | $7,000,000 | 100.00% |
| Product | Percentage | Joint Costs | Allocated | Separable Costs | Product Costs |
| Catsup | 35.71% x | $420,000 = | $149,982 + | $300,000 = | $449,982 |
| Juice | 42.86% x | 420,000 = | 180,012 + | 750,000 = | 930,012 |
| Canned | 21.43% x | 420,000 = | 90,006 + | 500,000 = | 590,006 |
Catsup cost per case = $449,982/100,000 = $4.50
Juice cost per case = $930,012/150,000 = $6.20
Canned cost per case = $590,006/200,000 = $2.95
