Arkansas Corporation manufactures liquid chemicals A and B from a joint process. It allocates joint costs...
Arkansas Corporation manufactures liquid chemicals A and B from a joint process. It allocates joint costs on the basis of sales value at split-off. Processing 5,500 gallons of product A and 1,000 gallons of product B to the split-off point costs $6,400. The sales value at split-off is $3.00 per gallon for product A and $38.50 for product B. Product B requires an additional separable process beyond split-off at a cost of $3.00 per gallon before it can be sold. Required: What is the company’s cost to produce 1,000 gallons of product B?
Homework Answers
| Product A | Product B | |
| Sale value at split-off | $16,500 (5,500*$3.00) | $38,500 (1,000*$38.50) |
Joint costs allocated to Product B = $6,400 * $38,500 / ($16,500 + $38,500)
= $4,480
Additional separable process costs beyoned split-off = $3 per gallon
Cost of 1,000 gallons = $3 * 1,000 = $3,000
The company’s cost to produce 1,000 gallons of product B = Joint costs allocated + Separable process costs
= $4,480 + $3,000
= $7,480
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Arkansas Corporation manufactures liquid chemicals A and B from
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Arkansas Corporation manufactures liquid chemicals A and B from a joint process. It allocates joint costs...
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Dorsey Company manufactures three products from a common input
in a joint processing operation. Joint processing costs up to the
split-off point total $350,000 per quarter. For financial reporting
purposes, the company allocates these costs to the joint products
on the basis of their relative sales value at the split-off point.
Unit selling prices and total output at the split-off point are as
follows:
Product
Selling Price
Quarterly
Output
A
$
16
per pound
15,000
pounds
B
$
8
per...
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