Question

Joint products A and B emerge from common processing costs of $100,000 and yield 2,000 units of Product A and 1,000 units of Product B. Product A can be sold for $100 per unit. Product B can be sold for $120 per unit. The amount of joint costs allocated to Product A (if joint costs are allocated on the basis of relative sales value) will be $ (rounded to nearest dollar).

Answer 1

Product A - Joint Cost Allocated = $62500

Step-by-step explanation:

To calculate the allocation of joint costs to Product A, we must first calculate the sales revenue or value for both products.

Total sales value - Product A = 100 * 2000 = $200000

Total sales value - Product B = 120 * 1000 = $120000

Total Sales Value = 200000 + 120000 = $320000

The amount of Joint costs that will be allocated to Product A will be,

Product A - Joint Cost Allocated = (200000 / 320000) * 100000

Product A - Joint Cost Allocated = $62500