Brevall Industries makes corn oil and corn meal from harvested corn in a joint process.The corn oil can be further processed into margarine, and the corn meal can be further processed into corn muffin mix.The joint cost incurred to process the corn to the split-off point is $140,000.Information on the quantities, value, and further processing costs for the joint products appear below: $\begin{array}{lrrrr}&&\text { Sales Value } & \text { Estimated Further } &\text { Sales Value } \
&\text { Quantity } & \text { At Split-off } & \text { Processing Cost } & \text { After Processing } \\hline
\text { Corn Oil } & 800,000 \mathrm{lbs} . & \$ 0.30 / \mathrm{lb} . & \$ 0.15 / \mathrm{bb} . & \$ 0.60 / \mathrm{lb} . \
\text { Corn Meal } & 1,600,000 \mathrm{lbs} . & 0.10 / \mathrm{b} . & 0.46 / \mathrm{lb} . & 0.55 / \mathrm{b} .
\end{array}$ Brevall allocates the joint cost to the products based on the relative sales value at split-off point.How much joint cost should be assigned to the corn oil?

Question

Quizplus · Accepted Answer

To allocate the joint cost based on the relative sales value at the split-off point, first calculate the total sales value at split-off for both products:- Corn Oil: $800,000 \, \text{lbs} \times \$0.30/\text{lb} = \$240,000$- Corn Meal: $1,600,000 \, \text{lbs} \times \$0.10/\text{lb} = \$160,000$Total sales value at split-off = \$240,000 + \$160,000 = \$400,000The proportion of the total sales value for Corn Oil = $\frac{\$240,000}{\$400,000} = 0.6$Joint cost allocated to Corn Oil = Total joint cost $\times$ Proportion for Corn Oil = \$140,000 $\times$ 0.6 = \$84,000

Brevall Industries Makes Corn Oil and Corn Meal from Harvested