Question

The rice milling process of Zigma Enterprises yields 6,000 pounds of rice grain and 2,000 pounds of hay. The rice grain receives 75 percent of the joint cost and the hay receives 25 percent. Which of the following allocation methods is used by Zigma to allocate the joint costs of cultivating rice?

a.The physical units method
b.The constant gross margin percentage method
c.The net realizable value method
d.The sales-value-at-split-off method

Answer 1

Zigma Enterprises allocates joint costs of cultivating rice using the sales-value-at-split-off method, where the rice grain and hay receive 75% and 25% of the costs, respectively.

Step-by-step explanation:

The rice milling process of Zigma Enterprises, which yields 6,000 pounds of rice grain and 2,000 pounds of hay, uses a method to allocate the joint costs of cultivating rice where the rice grain receives 75 percent of the cost and the hay receives 25 percent. The allocation method in question is the sales-value-at-split-off method. This method is used to allocate joint costs based on the relative sales value of the different products at the point where they are first separable in this case, the point right after the rice has been milled.