Question

Wren Pork Company uses the value basis of allocating joint costs in its production of pork products. Relevant information for the current period follows: Product Pounds Price/lb. Loin chops 2,700 $ 5.00 Ground 9,000 2.00 Ribs 3,750 4.60 Bacon 7,500 3.50 The total joint cost for the current period was $45,000. How much of this cost should Wren Pork allocate to Loin chops?

Answer 1

$8,100

Explanation:

As per the data given in the question, first we have to determine the total cost and per unit cost for allocation made to Loin chops which are shown below:

Total cost = cost of loin + cost of chops + cost of ground + cost of bacon

= ($2,700 × 5) + ($9,000 × 2) + ($3,750 × 4.6) + ($7,500 × 3.5)

= $75,000

Therefore, per unit cost is

= Total joint Cost ÷ total cost

= $45,000 ÷ $75,000

= $0.6

Hence allocation to loin chops is

= ($2,700 × 5) × $0.6

= $8,100