Data pertaining to a company's joint production for the current period follows: $\begin{array}{llcc}
& \text { L } & \text { M } \
\text { Quantities produced } &200 \text {Ibs}&150 \text {Ibs}\
\text { Market value at split-off point } &\$8/ \text {Ib}&\$16/ \text {Ib}\
\end{array}$
Compute the cost to be allocated to Product M for this period's $660 of joint costs if the value basis is used.
A) $264.
B) $396.
C) $330.
D) $1,364.
E) $796.

Question

Data pertaining to a company's joint production for the current period follows: $\begin{array}{llcc}
 & \text { L } &  \text { M } \
 \text { Quantities produced } &200 \text {Ibs}&150  \text {Ibs}\
 \text { Market value at split-off point } &\$8/ \text {Ib}&\$16/ \text {Ib}\
\end{array}$
 Compute the cost to be allocated to Product M for this period's $660 of joint costs if the value basis is used.
A) $264.
B) $396.
C) $330.
D) $1,364.
E) $796.

Quizplus · Accepted Answer

The cost allocation to Product M is based on its proportion of the total market value at the split-off point. Product M's market value is 150 lbs * $16/lb = $2400. Product L's market value is 200 lbs * $8/lb = $1600. The total market value is $2400 + $1600 = $4000. The proportion for Product M is $2400/$4000 = 0.6. Therefore, the cost allocated to Product M is 0.6 * $660 = $396.

Data Pertaining to a Company's Joint Production for the Current