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Gardner Company processes products in a joint processing operation that produces products A and B in a joint process. The company incurs $1,200,000 of joint processing costs monthly. Currently, 3,600 of A and 2,800 of B are being produced each month. Management plans to decrease B's production by 600 units in order to increase the production of A by 1,000 units. Additionally, this change will require minor modifications which will add $40,000 to the production costs. This cost is entirely attributable to product B
-What is the amount of the joint costs allocable to A before the changes are made to the existing production process, assuming Gardner allocates its joint costs according to the proportion of A and B produced?
A) $675,000
B) $547,058
C) $529,412
D) $525,000

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Quizplus · Accepted Answer

Before the changes, the total units produced are 3,600 (A) + 2,800 (B) = 6,400 units. The allocation of joint costs to A is based on its proportion of total production, which is 3,600 / 6,400 = 56.25%. Therefore, the joint costs allocable to A are 56.25% of $1,200,000 = $675,000.

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