Recyclers, Inc. reprocesses paper and obtains 2 main products: a by-product and a waste. By-product revenues are treated as a reduction in joint costs. During the period 1,000 tons were processed at a cost of $12,000 for materials and processing, resulting in the following: Sales Value Separable Sales Value After
Product Tons at Split-Off Costs Further Processing
Main-1 200 $4,000 $2,000 $10,000
Main-2 400 5,000 6,000 12,000
By-product 300 2,000 -0- 2,000
Waste 100 -0- -0- -0-
If the firm allocates joint costs to the main products using the sales value at split-off point method, how much will be allocated to Main-2?
A)$5,556
B)$4,545
C)$5,333
D)$6,666

Question

Quizplus · Accepted Answer

The sales value at split-off for Main-1 is $4,000 and for Main-2 is $5,000. The total sales value at split-off for both main products is $9,000. The joint costs to be allocated are $12,000 - $2,000 (by-product revenue) = $10,000. The allocation to Main-2 is ($5,000 / $9,000) * $10,000 = $5,556.