Bevo Beef Company uses the relative market value method of allocating joint costs in their production of beef products. Relevant information for the current period follows:
$\begin{array}{lrr}\text { Product } & \begin{array}{c}
\text { Production in } \
\text { Pounds }
\end{array} & \begin{array}{c}
\text { Market } \
\text { Price/lb. }
\end{array}\\hline
\text { Sirloin } & 3,000 & \$ 5.00 \
\text { Hamburger } & 10,000 & 2.00 \
\text { Rib eye } & 4,000 & 4.75 \
\text { Roast } & 6,000 & 3.50
\end{array}$
The total joint cost for the current period was $43,000. How much of this cost should Bevo Beef allocate to sirloin?

Question

Bevo Beef Company uses the relative market value method of allocating joint costs in their production of beef products. Relevant information for the current period follows: 
$\begin{array}{lrr}\text { Product } & \begin{array}{c}
\text { Production in } \
\text { Pounds }
\end{array} & \begin{array}{c}
\text { Market } \
\text { Price/lb. }
\end{array}\\hline
\text { Sirloin } & 3,000 & \$ 5.00 \
\text { Hamburger } & 10,000 & 2.00 \
\text { Rib eye } & 4,000 & 4.75 \
\text { Roast } & 6,000 & 3.50
\end{array}$
The total joint cost for the current period was $43,000. How much of this cost should Bevo Beef allocate to sirloin?

Quizplus · Accepted Answer

The relative market value method allocates joint costs based on the proportion of each product's market value to the total market value. Sirloin's market value is 3,000 lbs * $5.00 = $15,000. The total market value is (3,000 * $5.00) + (10,000 * $2.00) + (4,000 * $4.75) + (6,000 * $3.50) = $75,000. The allocation for sirloin is ($15,000 / $75,000) * $43,000 = $8,600.

Bevo Beef Company Uses the Relative Market Value Method of Allocating