. St. Louis Corporation has two products, the Cardinals and the Blues. Volume in

Question

. St. Louis Corporation has two products, the Cardinals and the Blues. Volume information for those two products follows:

                        Product                                              Volume

                        Cardinals                                           50,000 grams

                        Blues                                                  30,000 grams

The joint cost of the two products is $140,000. What portion of the joint cost will product be allocated if the allocation is performed by volume?

            A. $50,000 and $30,000                                        B. $37,500 and 102,500

            C. $100,000 and 40,000                                        D. $87,500 and 52,500

Explanation / Answer

Cost of Product Cardinals = Total Cost * Volume of Cardinals/ Total Volume

                                         = 140000 * 50000 / 80000

                                         = $ 87500

Cost of Product Blues = Total Cost * Volume of Blues/ Total Volume

                                    = 140000 * 30000 / 80000

                                   = $ 52500

Ans D) $ 87500 and $ 52500

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