Hurley Processors processes clay into two joint products, molding foam and craft blocks.When processed, each pound of clay yields 20 units of foam and 80 units of blocks.Foam sells for $2 per unit and blocks sells for $1.50 per unit.The total cost to process a 100-pound batch of clay is $35.If the relative sales value method is used to allocate the joint costs, how much will be allocated to craft blocks?
A)$8.75
B)$26.25
C)$28.00
D)$15.00

Question

Quizplus · Accepted Answer

The relative sales value method allocates joint costs based on the proportion of each product's sales value to the total sales value. For a 100-pound batch: Foam: 20 units/pound * 100 pounds = 2000 units * $2/unit = $4000 Blocks: 80 units/pound * 100 pounds = 8000 units * $1.50/unit = $12000 Total sales value = $4000 (Foam) + $12000 (Blocks) = $16000 Proportion of Blocks = $12000 / $16000 = 0.75 (75%) Joint cost to be allocated = $35 * 0.75 = $26.25

Hurley Processors Processes Clay into Two Joint Products, Molding Foam