procéšs roP the euPent perlOU Data pertaining to a company\'s joint man facturin

Question

procéšs roP the euPent perlOU Data pertaining to a company's joint man facturing follows: Product Product 300 lbs. 200 lbs. $1,600 $800 Quantities produced Processing cost after products are separated Market value at point of separation $8/lb. $18/lb. This period's joint costs equal $1,140 Required: 1. Compute the amount of joint costs that will be assigned to each product if joint costs are allocate the basis of pounds produced. 2. Compute the amount of joint costs that will be assigned to each product if joint costs are allocate the basis of market value at the point of separation.

Explanation / Answer

Solution:

The joint costs can be defined as the costs which are earned to convert raw material into other separarte products.

Since, it is incurred to convert raw material into other products, we need to allocate the joint costs to other separate products to calculate the profit of the products.

There are many basis of allocating joint costs to other separate products. Allocating on the basis of pounds produced and market value at the point of separation are among those basis.

Here, we need to allocate joint costs to products on the basis of pounds prodcued and the market value at the point of separation.

1.

Let's first focus on the allocation of joint costs on the basis of pounds produced.

Given,

The joint costs are allocated as under -

Thus, the joint cost of total $ 1,140 allocated to Product A as = $ 684 and Product B as = $ 456.

2.

Now, let's focus on the allocation of the costs on the basis of market value at the point of separation.

Market value will be calculated as = Pounds produced X Market Value at the point of separation.

Market Value of product A = 300 pouns X $ 8 / lbs = $ 2,400

Market Value of product B = 200 pounds X $ 18 / lbs = $ 3,600.

The joint costs are allocated as under -

Thus, the joint cost of total $ 1,140 allocated to Product A as = $ 456 and Product B as = $ 684.

Product Pounds Produced Weights assigned to joint costs Joint Cost Allocated Working A 300 60% $ 684 (300 lbs / 500 lbs X $ 1,140) B 200 40% $ 456 (200 lbs / 500 lbs X $ 1,140) 500 100% $ 1,140

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