General Chemical produced 10,000 gallons of Greon and 20,000 gallons of Baron.Joint costs incurred in producing the two products totaled $7,500.At the split-off point,Greon has a market value of $6 per gallon and Baron $2 per gallon.What portion of the joint costs should be allocated to Greon if the basis is market value at point of separation?
A) $2,500
B) $3,000
C) $4,500
D) $5,625
E) $1,500

Question

Quizplus · Accepted Answer

Market value Greon = 10,000 x $6 = $60,000
Market value Baron = 20,000 x $2 = $40,000
Total market value = $60,000 + $40,000 = $100,000
Joint costs allocated to Greon = ($7,500)($60,000/$100,000) = $4,500

General Chemical Produced 10,000 Gallons of Greon and 20,000 Gallons