Soren Company makes two products from a joint input that have the following information: $\begin{array}{lrrrr}&\text { Units } & \text { Sales Value } & \text { Total Additional } & \text { Sales Value } \
&&\text { Per Unit } & \text { Processing } & \text { Per Unit After } \
&\text { Produced } & \text { At Split-Off } & \text { Costs } & \text { Additional Processing }\\hline
\text { Product A } & 40,000 & \$ 10 & \$ 400,000 & \$ 15 \
\text { Product B } & 150.000 & 4 & 300,000 & 7
\end{array}$ The joint cost incurred to produce the two products to the split-off point is $600,000. How much joint cost should be allocated to Product A using the relative sales value at split-off as the allocation method?

Question

Quizplus · Accepted Answer

The relative sales value at split-off method allocates joint costs based on the proportion of each product's sales value at the split-off point to the total sales value. Product A's sales value at split-off is $400,000 (40,000 units * $10), and Product B's is $600,000 (150,000 units * $4). The total sales value is $1,000,000. Product A's proportion is $400,000 / $1,000,000 = 0.4. Therefore, the joint cost allocated to Product A is 0.4 * $600,000 = $240,000.

Soren Company Makes Two Products from a Joint Input That