Question

Cariboo Manufacturing Company incurred a joint cost of $945,000 in the production of X and Y in a joint process. Presently, 2,900 of X and 2,500 of Y are being produced each month. Management plans to decrease X's production by 850 units in order to increase the production of Y by 1,160 units. Additionally, this change will require minor modifications, which will add $64,800 to the joint cost. This cost is entirely attributable to product Y. What is the amount of the joint costs allocable to X and Y before changes to existing production, assuming Cariboo allocates their joint costs according to the proportion of Y and X produced

Answer 1

the joint cost allocated to X before changes to existing production = $507,500

and

the joint cost allocated to Y before changes to existing production = $437,500

Step-by-step explanation:

Given:

Joint cost incurred by the company = $945,000.

The number of units of X produced presently = 2,900

The number of units of Y produced presently = 2,500

Total joint units produced presently = 2,900 + 2,500 = 5,400 units

Therefore,

the total joint cost per joint unit

= (Joint cost incurred by the company) / (Total joint units produced presently )

on substituting the respective values, we have

the total joint cost per joint unit = $945,000 / 5,400 = $175

Hence,

the joint cost allocated to X before changes to existing production

= $ 175 × number of units of X produced presently

= $175 × 2,900 = $507,500

and

the joint cost allocated to Y before changes to existing production

= $ 175 × number of units of Y produced presently

= $175 × 2,500 = $437,500