Georgia Solution 1 of 1
Joint process
Separate finishing processes
Alpha
Beta
Gamma
Total
Units
10,000 50,000 20,000
Variable
$40,000 $60,000 $40,000
Fixed
$5,000 $5,000 $5,000
Total Costs
$45,000
$65,000
$45,000
$110,000
Revenue
$75,000
$85,000
$160,000
Profit
Net Realization
$10,000
$40,000
$50,000
$5,000
Price
$1.50 $4.25
1. Full costs
Beta
Gamma
Allocated total joint costs
$9,000
$36,000
Joint total costs per unit
$0.18
$1.80
Separable total costs per unit
$1.30
$2.25
Total full costs per unit
$1.48
$4.05
Var NRV
2. Variable costs
Beta
Gamma
Beta
Gamma
$15,000
$45,000
Allocated variable joint costs
$8,000
$32,000
$10,000
$30,000
Joint variable costs per unit
$0.16
$1.60
$0.20
$1.50
Separable variable costs per unit
$1.20
$2.00
$1.20
$2.00
Total variable costs per unit
$1.36
$3.60
$1.40
$3.50
3
Alpha
Beta
Gamma
To get 1 gallon of gamma
0.50
2.50
1.00
units
Revenue from beta
$3.75
$3.25
Plug = Answer
Variable Processing costs
($2.00)
($3.00)
($2.00)
Net: minimum price for gamma
($2.00)
$0.75
$1.25
Equate
Sum = 0
OR can use allocated costs
Revenue or minimum price
$3.75
$3.25
Plug = Answer
To get 1 gallon of gamma
2.50
1.00
Total variable costs per unit
$1.36
$3.60
Allocated variable costs
$3.40
$3.60
Margin
$0.35
=
($0.35)
4
Beta
Gamma
Beta
Change in sales
(12,500)
(5,000)
-25.00%
Incremental Price
$1.50
($3.75)
Plug = Answer
Revenue
($18,750)
$18,750
Variable costs
$15,000
($10,000)
Incremental contribution
($3,750)
8,750
Incremental Fixed costs
($5,000)
Total opportunity costs
(8,750)
=
$8,750
Or Directly
$3.75
Total = Answer
Incremental Fixed costs/unit
$1.00
Incremental Price
$1.50
$2.75
Plug
Variable costs
($1.20)
($2.00)
Margin per unit
$0.30
$0.75
Units per gamma
2.50
1.00
Work
Lost margin per gamma
$0.75
$0.75
Upwards