Question

The Silver Center (TSC) produces cups and platters. TSC purchases silver and other metals that are processed into silver alloy that is used to make platters and cups. TSC incurred $52,000 of materials cost and $56,000 of labor cost to produce the silver alloy. Platters are made first and the residual alloy is remixed into a lower grade silver plated material that is used to make the cups. Remixing cost amount to $5,000. The recent batch contained 10,000 platters and 4,000 cups. TSC sold the platters for $160,000 and the cups for $24,000. If number of units is used to allocate the joint cost, what is the income earned for platters?

Answer 1

The Silver Center's allocated joint cost per unit is $8.07. To calculate the income earned on platters, multiply the cost per unit by the number of platters (10,000) and subtract that from the total sales of platters ($160,000), resulting in an income of $79,300.

Step-by-step explanation:

The process of allocating joint costs to products using a physical measure such as the number of units involves dividing the total joint costs by the total number of units produced to get a cost per unit, and then assigning this cost to each product based on the number of units of each product produced.

In the case of The Silver Center (TSC), the joint costs incurred in producing the silver alloy utilized for both platters and cups are $52,000 (materials cost) + $56,000 (labor cost) which amounts to $108,000. Adding the remixing costs of $5,000 into that, the total joint costs become $113,000. Since TSC produced 10,000 platters and 4,000 cups, the total is 14,000 units. To find the cost allocated to each platter, divide the total joint costs by the total number of units produced: $113,000 / 14,000 = $8.07 per unit. Therefore, each platter has an allocated cost of $8.07.

To calculate the income earned from platters, multiply the number of platters sold by the selling price and subtract the total cost allocated to platters: $160,000 (revenue from platters) - ($8.07 * 10,000 platters) = $160,000 - $80,700, which equals a total income of $79,300 for the platters.