Universal Chemical Company (UCC) manufactures two products as part of a joint pr
ID: 2628937 • Letter: U
Question
Universal Chemical Company (UCC) manufactures two products as part of a joint process: A1 and B1. Joint costs up to the split-off point total $20,000. The joint costs are allocated to A1 and B1 in proportion to their relative sales values. At the split-off point, product A1 can be sold for $40,000, whereas product B1 can be sold for $60,000. Product A1 can be processed further to make product A2, at an incremental cost of $35,000. A2 can be sold for $80,000. Product B1 can be processed further to make product B2, at an incremental cost of $45,000. B2 can be sold for $90,000. Joint costs allocated to product A1 total: Question 18 options: $8,000. $12,250. $12,000. $20,000.
Explanation / Answer
Product B1 sells for $60,000
Cost allocation for A1 = $40,000 / ($40,000 + $60,000) = .4
For first $20,000, A1 has $20,000 x .4 = $8000 cost
All Subsequent costs are allocated to product A2 and B2. So we do not add them in. Final cost - $8000
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