Question

Laredo manufactures Nuts and Bolts from a joint process (cost = $80,000). Five thousand pounds of Nuts can be sold at split-off for $20 per pound; ten thousand pounds of Bolts can be sold at split-off for $15 per pound. For product costing purposes Laredo allocates joint costs using the relative sales value method. The amount of joint cost allocated to Nuts and Bolts, respectively, would be

Answer 1

Cost for Nuts = $80,000
`*` 2/5 = $32,000

Cost for bolts = $80,000
`*` 3/5 = $48,000

Step-by-step explanation:

Provided joint cost = $80,000

Total quantity of nuts and bolts at separation

Nuts = 5,000 pounds

Bolts = 10,000 pounds

Weights of cost will be based on value of goods.

Nuts = 5,000
`*` $20 = $100,000

Bolts = 10,000
`*` $15 = $150,000

Thus, weights will be 10:15 = 2:3

Cost for Nuts = $80,000
`*` 2/5 = $32,000

Cost for bolts = $80,000
`*` 3/5 = $48,000