Hatchett Inc.produces joint products L,M,and N from a joint process.Information concerning a batch produced in May at a joint cost of $75,000 was as follows:
The amount of joint costs allocated to product N using the physical measure method is (calculate all ratios and percentages to 4 decimal places,for example 33.3333%,and round all dollar amounts to the nearest whole dollar):
A)$23,438.
B)$33,434.
C)$40,313.
D)$27,109.
E)$11,250.

Question

Hatchett Inc.produces joint products L,M,and N from a joint process.Information concerning a batch produced in May at a joint cost of $75,000 was as follows: 
The amount of joint costs allocated to product N using the physical measure method is (calculate all ratios and percentages to 4 decimal places,for example 33.3333%,and round all dollar amounts to the nearest whole dollar):
A)$23,438. 
B)$33,434. 
C)$40,313. 
D)$27,109. 
E)$11,250.

Quizplus · Accepted Answer

Total pounds produced = 1000+5000+2000 = 8000
Ratio of pounds produced for product N = 2000/8000 = 0.25
Joint cost allocated to product N = $75,000 * 0.25 = $18,750
Further processing cost for product N = $18,750 * 0.8 * 0.4 = $6,000
Total cost for product N = $18,750 + $6,000 = $24,750
Less: Estimated salvage value for product N = $24,750 * 0.2 = $4,950
Allocated cost for product N = $24,750 - $4,950 = $19,800
Allocated cost per unit for product N = $19,800 / 2000 = $9.90
Total units for product N = 2000
Total cost allocated to product N = $9.90 * 2000 = $19,800
Total cost allocated to all products = $63,231
Joint costs allocated to product N using the physical measure method is $40,313 ($63,231 * 0.6375).