Question

Using Total Gallon as the cost driver, how much (dollars) would be allocated to the Medium Grade joint product? See circle pn the photo below

Ocewth Google Docs EXERCISE 2: Axdom Petroleum operates an oll refining facility that produces three different grades of fuel. Following are the production and sales information for the month of August. Product Low grade Regular grade Premium grade TOTAL Gallons Produced 336,000 480,000 384,000 1,200,000 Sales Value at Split-off Point $175,000 460,000 405,000 $1,040,000 The Joint Costs of processing for August were $624,000. Determine the amount of joint costs allocated based on the gallons produced Step 1: Compute an allocation rate (Round to two digits beyond the decimal point), Total Joint Costs Allocation Rate Cost Driver(Allocation Base) Total Gallons produced $ 1 E $ per gallon 31 Step 2: Allocate costs based on gallons produced Allocation Rate Low grade $ х Gallons Allocated gallons $ Medium grade $ X gallons $ Premium erade $ Ballons TOTAL

Answer 1

Answer

Total Joint Cost = $624,000
Step 1 : Allocation Rate
Total Joint Cost		Cost Driver(Allocation base)		Allocation Rate
		Total Gallons Produced
$624,000	/	1200000	=	$0.52	per gallon
Step 2 : Allocated Cost
		Allocation Rate		Gallons		Allocated
Low Grade		$0.52	x	336000	=	$174,720
Medium Grade		$0.52	x	480000	=	$249,600
Premium Grade		$0.52	x	384000	=	$199,680
TOTAL						$624,000

Answer Total Joint Cost = $624,000 Step 1: Allocation Rate Total Joint Cost Allocation Rate Cost Driver(Allocation base) Total Gallons Produced $624,000 / 1200000 $0.52 per gallon Step 2: Allocated Cost Allocation Rate Gallons Allocated Low Grade $0.52 х 336000 $174,720 Medium Grade $0.52 480000 $249,600 $0.52 384000 Premium Grade TOTAL $199,680 $624,000