Figure 7-7 Garden of Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs $50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of $60 per unit and $40 per unit for Dulls. The market price is $250 for Brights and $200 for Dulls.
Refer to Figure 7-7. What is the amount of joint costs allocated to Dulls using the physical units method?

Question

Quizplus · Accepted Answer

The physical units method allocates joint costs based on the proportion of total units produced. Dulls make up 1,000 out of 1,250 total units (250 Brights + 1,000 Dulls), which is 80%. Therefore, 80% of the $50,000 joint costs is allocated to Dulls, which is $40,000.

Figure 7-7 Garden of Eden Company Manufactures Two Products, Brights