Question

9) Jagger, Inc. production begins in Department A with 1,000 kilograms of material, of which 40% goes to Department B, 50% to Department C, and the rest evaporates. From Department C, 72% goes to Department D, 24% to Department E, and the remainder is scrapped. There are no intermediate markets. By-product sales are treated as miscellaneous income. The following occurred during the month: Department Costs Sales Product Type $20,000 51,000 $10,000 By-product 30,000 20,000 60,000 Main-1 10,000 30,000 Main-2 Do o co If Jagger uses the physical output method, the total cost of Main-1 is: a) $40,455 *b) $57,500 c) $42,500 d) $52,500

Answer 1

Answer : b) $57500

Calculated as

Total Input in A = 1000 kg

50% to Dept C = 50% of 1000 kg = 500 kg

From C Dept 72% to D and 24% to E

To D = 72% of 500 kg = 360 kg

To E = 24% of 500 = 120 kg

Total cost of Dept A and C = $20000+30000 = $50000

So cost allocated to D =50000*360/480 = $37500

So Total cost of D or Main 1 = $ 20000 cost of D + Allocated cost $37500

So Total cost of D or Main 1 = $57500