Sky airlines produces two different aircrafts. The joint process incurs costs of $10 million. Both aircrafts can be sold at split-off or processed further to increase the final sales value. The following information is related to the two products. (all costs are recorded in millions) If the sales price at split-off provided is reliable, what is the joint costs allocated to B797, using the appropriate method of allocation?
A)$5 million.
B)$5.33 million.
C)$5.50 million.
D)$5.74 million.

Question

Sky airlines produces two different aircrafts. The joint process incurs costs of $10 million. Both aircrafts can be sold at split-off or processed further to increase the final sales value. The following information is related to the two products. (all costs are recorded in millions)  If the sales price at split-off provided is reliable, what is the joint costs allocated to B797, using the appropriate method of allocation?
A)$5 million. 
B)$5.33 million. 
C)$5.50 million. 
D)$5.74 million.

Quizplus · Accepted Answer

$230 + $310 = $540
$310 ÷ $540 x $10 = $5.74 
B752sale at split-off + B797 sale at split-off = total sale at split-off
B797sale at split-off ÷ total sale at split-off x joint process costs

Sky Airlines Produces Two Different Aircrafts