Question

Carving Creations jointly produces wood chips and sawdust used in agriculture. The wood chips and sawdust are actually by-products of the company’s core operations, but Carving Creations accounts for them just like normally produced goods because of their large volumes. One jointly produced batch yields 3,000 cubic yards of wood chips and 10,000 cubic yards of sawdust, and the estimated cost per batch is $21,400. However, the joint production of each good is not equally weighted. Management at Carving Creations estimates that for the time it takes to produce 10 cubic yards of wood chips in the joint production process, only 2 cubic yards of sawdust are produced.

Given this information, allocate the joint costs of production to each product using the weighted average method.

Joint Product Allocation
Sawdust _____$
Wood chips _____
Totals _____ $

Answer 1

Carving Creations

Joint Product Allocation

Sawdust _____$ 12,840 ($0.428 * 30,000)

Wood chips _____ $8,560 ($0.428 * 20,000)

Totals _____ $21,400

Step-by-step explanation:

a) Data and Calculations:

Wood chips = 3,000 cubic yards

Sawdust = 10,000 cubic yards

Estimated batch cost = $21,400

Weight assigned to wood chips production = 10

Weight assigned to sawdust production = 2

Weighted Allocation of the joint costs:

Wood chips = 3,000 * 10 = 30,000

Sawdust = 10,000 * 2 = 20,000

Total weighted units = 50,000

Allocation rate based on weights = $21,400/50,000

= $0.428

Joint Product Allocation

Sawdust _____$ 12,840 ($0.428 * 30,000)

Wood chips _____ $8,560 ($0.428 * 20,000)

Totals _____ $21,400