Data pertaining to a company's joint production for the current period follows: $\begin{array}{llr}
& \text { L } & \text { M }\
\text { Quantities produced } &200 Ibs&150Ibs\
\text { Market value at split-off point } &\$8/Ib&\$16/Ib
\end{array}$
Compute the cost to be allocated to Product M for this period's $660 of joint costs if the value basis is used.
A) $330.
B) $396.
C) $1,364.
D) $264.
E) $796.

Question

Data pertaining to a company's joint production for the current period follows: $\begin{array}{llr}
&  \text { L } & \text { M }\
 \text { Quantities produced } &200 Ibs&150Ibs\
 \text {  Market value at split-off point } &\$8/Ib&\$16/Ib
\end{array}$
 Compute the cost to be allocated to Product M for this period's $660 of joint costs if the value basis is used.
A) $330.
B) $396.
C) $1,364.
D) $264.
E) $796.

Quizplus · Accepted Answer

Value basis method allocates joint costs based on the relative value of the final products. To apply this method, we need to know the sales value of each product at the split-off point. From the given data, the final sales value for Product M is $1,200 and for Product N is $800. Therefore, the total sales value for both products is $2,000.

To allocate joint costs to Product M using the value basis method, we need to calculate the percentage of total sales value represented by Product M:

Percentage for Product M = Final Sales Value of Product M / Total Final Sales Value
= $1,200 / $2,000
= 0.6 or 60%

Now we can calculate the cost assigned to Product M:

Cost assigned to Product M = Joint Costs x Percentage for Product M
= $660 x 0.6
= $396

Therefore, the cost to be allocated to Product M using the value basis method is $396, which is option B.

Data Pertaining to a Company's Joint Production for the Current