Bevo Beef Company uses the relative market value method of allocating joint costs in their production of beef products.Relevant information for the current period follows: $\begin{array}{lrr}
&\text { Production in } & \text { Market } \
\underline {\text { Product } }& \underline {\text { Pounds }}&\underline {\text { Price/Pound }}\
\text { Sirloin } & 3,000 & \$ 5.00 \
\text { Hamburger } & 10,000 & 2.00 \
\text { Rib eye } & 4,000 & 4.75 \
\text { Roast } & 6,000 & 3.50
\end{array}$ The total joint cost for the current period was $43,000.How much of this cost should Bevo Beef allocate to sirloin?
A)$0
B)$5,909
C)$8,600
D)$10,750
E)$43,000

Question

Quizplus · Accepted Answer

To allocate joint costs using the relative market value method, we need to first calculate the total market value of all products. This is done by multiplying the production in pounds by the price per pound for each product and adding up the results.

Total market value = (3,000 pounds x $5.00/pound) + (10,000 pounds x $2.00/pound) + (4,000 pounds x $4.75/pound) + (6,000 pounds x $3.50/pound)
Total market value = $15,000 + $20,000 + $19,000 + $21,000
Total market value = $75,000

Next, we need to calculate the percentage of the total market value that each product represents. This is done by dividing the market value of each product by the total market value.

Percentage of market value for sirloin = ($15,000 / $75,000) x 100% = 20%

Finally, we can allocate the joint cost by multiplying the total joint cost by the percentage of market value for each product.

Allocation of joint cost for sirloin = 20% x $43,000 = $8,600

Therefore, the answer is C) $8,600.

Bevo Beef Company Uses the Relative Market Value Method of Allocating