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Differential Chemical produced 14,000 gallons of Preon and 28,000 gallons of Paron. Joint costs incurred in producing the two products totaled $7,800. At the split-off point, Preon has a market value of
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Differential Chemical produced 14,000 gallons of Preon and 28,000 gallons of Paron. Joint costs incurred in producing the two products totaled $7,800. At the split-off point, Preon has a market value of $6.00 per gallon and Paron $2.00 per gallon. Compute the portion of the joint costs to be allocated to Preon if the value basis is used.Multiple Choice$1,560.$5,845.$2,600.$4,680.$3,120.

User Eric Dand
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1 Answer

15 votes
15 votes

Answer: $4680

Step-by-step explanation:

The joint cost allocated to Preon will be calculated below as:

Preon's value will be:

= 14000 × $6.00

= $84000

Paron's value will be:

= 28000 × $2.00

= $56000

Total value = Preon's value + Paron's value

= $84000 + $56000

= $140000

The joint cost allocated to Preon will be

= 7800 × 84000/140000

= $4680

User Loganfsmyth
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