Exhibit 7-8
Petro Inc.produces two joint products,product A and B.Prior to the split-off point,the company incurred $600,000 in joint costs.Production totaled 72,000 pounds for product A and 48,000 pounds for product B.
-Refer to Exhibit 7-8.What amount of joint costs is allocated to product A using the physical quantities method (pounds)?

Question

Quizplus · Accepted Answer

The physical quantities method allocates joint costs based on the pounds or units of each product produced. To calculate the allocation of joint costs to product A using this method, we need to determine the proportion of the total pounds produced that is accounted for by product A:

Product A pounds / Total pounds = 72,000 / 120,000 = 0.6

Thus, product A accounts for 60% of the total pounds produced. To allocate joint costs to product A using this proportion, we multiply it by the total joint costs incurred:

0.6 x $600,000 = $360,000

Therefore, the correct answer is A) $360,000.

Exhibit 7-8 Petro Inc.produces Two Joint Products,product a and B.Prior to the to the Split-Off