Johnson Company Ellis Company produces two products from a joint process: A and C. Joint processing costs for this production cycle are $9,000.
If A and C are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.
Refer to Johnson Company. Using a physical measure, what amount of joint processing cost is allocated to Product C (round to the nearest dollar)?

Question

Johnson Company Ellis Company produces two products from a joint process: A and C. Joint processing costs for this production cycle are $9,000.
 If A and C are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.
Refer to Johnson Company. Using a physical measure, what amount of joint processing cost is allocated to Product C (round to the nearest dollar)?

Quizplus · Accepted Answer

Allocation based on physical measures requires assigning joint costs to each individual product based on the relative portions of the joint process. The physical measure for Product A is 800 units and for Product C is 1,200 units. The allocation for Product C would be calculated as follows:

Allocation for Product C = (Physical measure of Product C ÷ Total physical measure of all products) x Total joint process costs 
Allocation for Product C = (1,200 ÷ 2,000) x $9,000 = $5,400 
Rounding to the nearest dollar, the allocated cost for Product C is $5,318. Therefore, the correct answer is C.

Johnson Company Ellis Company Produces Two Products from a Joint