Exhibit 7-9
Doughnuts Company uses flour to produce two joint products,Premium and Deluxe.When processed,each pound of flour yields 8 units of Premium and 12 units of Deluxe.Premium doughnuts sell for $1.00 per unit and Deluxe sell for $2.00 per unit.The total cost to process a 10-pound batch of flour is $12.00.
-Refer to Exhibit 7-9.If the physical quantities method is used to allocate the $12 in joint costs,how much will be allocated to Premium doughnuts?

Question

Quizplus · Accepted Answer

$4.80The physical quantities method allocates joint costs based on the physical output. For a 10-pound batch, Premium yields 80 units (8 units/pound * 10 pounds) and Deluxe yields 120 units (12 units/pound * 10 pounds), totaling 200 units. The cost per unit is $12/200 = $0.06. Premium's allocation is 80 units * $0.06 = $4.80.

Exhibit 7-9 Doughnuts Company Uses Flour to Produce Two Joint Products,Premium and Products,Premium