McBride's Dairy has 200 gallons of cream and 600 gallons of skimmed milk and has incurred $1,000 of joint costs at the split-off point. It also incorporates a processing time weight factor of 1 for the cream and 3 for the skimmed milk. The amount of this cost that will be allocated to cream using the weighted average method is

Question

Quizplus · Accepted Answer

The weighted average method allocates joint costs based on the weight factors. Cream has a weight factor of 1 and skimmed milk has a weight factor of 3. The total weight is 1*200 + 3*600 = 200 + 1800 = 2000. The proportion for cream is (1*200)/2000 = 200/2000 = 0.1. Therefore, the cost allocated to cream is 0.1 * $1,000 = $100.

McBride's Dairy Has 200 Gallons of Cream and 600 Gallons