Atkins Farms makes two products from their apples: apple donuts and apple cider.
ID: 2429540 • Letter: A
Question
Atkins Farms makes two products from their apples: apple donuts and apple cider. From a standard batch of 100,000 pounds of apples, Atkins produces 20,000 pounds of apple donuts and 80,000 pounds of apple cider. Producing a standard batch costs $27,000. The sales price per pound are $3.50 for donuts and $2.25 for apple cider.
Allocate the joint product cost to the two products using weight as the allocation base.
Allocate the joint product cost to the two products using market value as the allocation base.
Explanation / Answer
Joint Cost = $ 27,000
Allocate the joint product cost to the two products using weight as the allocation base.
Production of Apple Donuts = 20000 Pounds
Production of Apple Cider = 80000 Pounds
Total Production = 100000 Pounds
Cost of Apple Donuts = 20000/100000 * 27000 = $ 5,400
Cost of Apple Ciders = 80000/100000 * 27000 = $ 21,600
Allocate the joint product cost to the two products using market value as the allocation base.
Market Value of Apple Donuts = 20000 *3.50 = 70000
Market Value of Apple Cider = 80000 *2.25 = 180000
Total Market Value = 70000+180000 = 250000
Cost of Apple Donuts = 70000/250000 * 27000 = $ 7,560
Cost of Apple Ciders = 180000/250000 * 27000 = $ 19,440
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