Answer Happy

(6.) Caldwell Company processes an ore in Department 1, out of which comes three products L, W and X. Product L is processed further through Department 2; Product W is sold without further processing. X is considered a by-product and is processed further through Department 3. Costs in Department 1 are P800,000 in total; Department 2 costs are P100,000; Department 3 costs are P50,000. Processing 600,000 pounds in Department 1 results in 50,000 pounds of Product L being produced, with 300,000 pounds of Product W and 100,000 pounds of Product X. Product L sells for P10 per pound; Product W sells for P2 per pound; Product X sells P3 per pound if considered as a joint product. If X is treated as a by-product, it is desired to make a profit of 10 percent of sales on Product X and also allow 25 percent for selling and administrative expenses. Use the net realizable value method in handling the product credit for Product X. Required: a) Compute unit costs per pound for Product L, W and X, using X as a by-product. Use the net realizable value method for allocating joint costs. Deduct the estimated NRV of the by-product produced from the joint costs of products L & W. b) Compute unit costs per pound for Products L, W and X using all three as joint products and allocating costs by the net realizable value method.