Question

A Company processes pine rosin into three products: turpentine, paint thinner, and spot remover. During May, the joint costs of processing were $720,000. Production and sales value information for the month is as follows: Product Units Produced Sales Value at Split-off Point Turpentine 15,000 liters $120,000 Paint thinner 15,000 liters $100,000 Spot remover 7,500 liters $50,000 Determine the amount of joint cost allocated to Paint thinner if the physical-measure method is used.

Answer 1

$288,000

Step-by-step explanation:

As per the given question the solution of the amount of joint cost allocated to Paint thinner is provided below:-

Here, we need to find out the amount of joint cost allocated to Paint thinner so we will find out first total units produced of each product and joint cost allocated to paint thinner which is follow below:-

Total units produced of each product = Turpentine + Paint thinner + Spot remover

= 15,000 liters + 15,000 liters + 7,500 liters

= 37,500

Joint cost allocated to paint thinner = Paint thinner of total units produced ÷ Total units produced of each product

= 15,000 ÷ 37,500

= 40%

Joint cost allocated to Paint thinner = Joint cost of processing × Joint cost allocated to paint thinner

= $720,000 × 40%

= $288,000

To reach the amount of joint cost allocated to Paint thinner we simply multiply the joint cost of processing with joint cost allocated to paint thinner.