Zena Company manufactures two products (A and B)from a joint process that cost $200,000 for the year just ended.Each product may be sold at the split-off point or processed further.Additional processing requires no special facilities,and production costs of further processing are entirely variable and traceable to the products involved.Further information follows.
If the joint costs are allocated based on the physical-units method,the amount of joint cost assigned to product A would be:
A)$80,000.
B)$100,000.
C)$104,000.
D)$120,000.
E)some other amount.

Question

Zena Company manufactures two products (A and B)from a joint process that cost $200,000 for the year just ended.Each product may be sold at the split-off point or processed further.Additional processing requires no special facilities,and production costs of further processing are entirely variable and traceable to the products involved.Further information follows. 
If the joint costs are allocated based on the physical-units method,the amount of joint cost assigned to product A would be:
A)$80,000. 
B)$100,000. 
C)$104,000. 
D)$120,000. 
E)some other amount.

Quizplus · Accepted Answer

Under the physical-units method, joint costs are allocated to individual products based on the number of units produced by each product. In this case, since there is no information about the number of units produced, we can assume that both products are produced in equal quantities. Therefore, each product is responsible for 50% of the joint costs.

Joint costs = $200,000 
Product A's share = 50% x $200,000 = $100,000 
Product B's share = 50% x $200,000 = $100,000

However, since product A can be sold at split-off point, it does not incur any further processing costs. Therefore, its share of the joint costs is only up to the split-off point.

Product A's joint cost = $100,000 x 0.8 = $80,000

Therefore, the correct choice is A) $80,000.

Zena Company Manufactures Two Products (A and B)from a Joint