A granary allocates the cost of unprocessed wheat to the production of feed, flour, and starch. For the current period, unprocessed wheat was purchased for $120,000, and the following quantities of product and sales revenues were produced. $$\begin{array} { l r c }
\text { Product } & \text { Pounds } & \text { Price per Pound } \
\text { Feed } & 100,000 & \$ 0.70 \
\text { Flour } & 50,000 & 2.20 \
\text { Starch } & 20,000 & 1.00
\end{array}$$ How much of the $120,000 cost should be allocated to feed if the value basis is used?
A) $ 12,250.
B) $ 42,000.
C) $ 45,000.
D) $ 70,000.
E) $ 100,000.

Question

A granary allocates the cost of unprocessed wheat to the production of feed, flour, and starch. For the current period, unprocessed wheat was purchased for $120,000, and the following quantities of product and sales revenues were produced. $$\begin{array} { l r c } 
\text { Product } & \text { Pounds } & \text { Price per Pound } \
\text { Feed } & 100,000 & \$ 0.70 \
\text { Flour } & 50,000 & 2.20 \
\text { Starch } & 20,000 & 1.00
\end{array}$$ How much of the $120,000 cost should be allocated to feed if the value basis is used?
A) $ 12,250.
B) $ 42,000.
C) $ 45,000.
D) $ 70,000.
E) $ 100,000.

Quizplus · Accepted Answer

The value basis allocates costs based on the proportion of total sales revenue. Feed's revenue is $70,000, Flour's is $110,000, and Starch's is $20,000, totaling $200,000. Feed's proportion is $70,000/$200,000 = 35%. Thus, 35% of $120,000 is $42,000.

A Granary Allocates the Cost of Unprocessed Wheat to the Production