Question

Garage Specialty Corporation manufactures joint products P and Q. During a recent period, joint costs amounted to $80,000 in the production of 20,000 gallons of P and 60,000 gallons of Q. Garage can sell P and Q at split-off for $2.20 per gallon and $2.60 per gallon, respectively. Alternatively, both products can be processed beyond the split-off point, as follows: P Q Separable processing costs $15,000 $35,000 Sales price (per gallon) if processed beyond split-off $3 $4 The joint cost allocated to Q under the relative-sales-value method would be:________.
a) $40,000.
b) $62,400.
c) $64,000.
d) $65,600.
e) some other amount.

Answer 1

Answer:

Option B,$62,400 is correct

Explanation:

Firstly,we need to determine the sales of each joint product if sold after the split off point as follows:

Sales value of P=20,000*$2.20=$44,000

sales value of Q=60,000*$2.60=$156,000

total sales value                          =$200,000

joint cost is $80,000

joint cost allocated to Q=total joint cost*Q sales value/total sales value

                                        =$80,000*156,000/200,000=$62,400

Out of the $80,000 joint cost incurred by both joint products,Q would be allocated $62,400