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. $$\begin{array} { l c c }
\text { Product } & \text { Pounds } & \text { Price per Pound } \
\text { Feed } & 100,000 & \$ 0.70 \
\text { Flour } & 50,000 & 2.20 \
\text { Starch } & 20,000 & 1.00
\end{array}$$ How much of the $120,000 cost should be allocated to flour if the value basis is used?
A) $24,500.
B) $84,000.
C) $66,000.
D) $70,000.
E) $200,000.

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. $$\begin{array} { l c c } 
\text { Product } & \text { Pounds } & \text { Price per Pound } \
\text { Feed } & 100,000 & \$ 0.70 \
\text { Flour } & 50,000 & 2.20 \
\text { Starch } & 20,000 & 1.00
\end{array}$$ How much of the $120,000 cost should be allocated to flour if the value basis is used?
A) $24,500.
B) $84,000.
C) $66,000.
D) $70,000.
E) $200,000.

Quizplus · Accepted Answer

The value basis allocates costs based on the proportion of total sales revenue. Flour's revenue is $110,000, total revenue is $204,000. Flour's allocation is ($110,000/$204,000) * $120,000 = $66,000.

A Granary Allocates the Cost of Unprocessed Wheat to the Production