Deli Products produces two products, X and Y, in a single process. In 2011, the joint costs of this process were $25,000. In addition, 4,000 units of X and 6,000 units of Y were produced and sold. Separable processing costs beyond the split-off point were: X - $10,000; Y - $20,000. X sells for $10.00 per unit; Y sells for $7.50 per unit.
What is the gross profit of product Y assuming the physical units method is used?
A)$25,000
B)$-0-
C)$10,000
D)$15,000

Question

Quizplus · Accepted Answer

The physical units method allocates joint costs based on the number of units produced. Product Y has 6,000 units out of a total of 10,000 units (4,000 X + 6,000 Y), so it is allocated 60% of the joint costs: $25,000 * 60% = $15,000. The total cost for Y is $15,000 (joint) + $20,000 (separable) = $35,000. Revenue from Y is 6,000 units * $7.50 = $45,000. Gross profit for Y is $45,000 - $35,000 = $10,000.

Deli Products Produces Two Products, X and Y, in a Single