Garage Specialty Corporation manufactures joint products P and Q. During a recent period, joint costs amounted to $80,000 in the production of 20,000 gallons of P and 60,000 gallons of Q. Garage can sell P and Q at split-off for $2.20 per gallon and $2.60 per gallon, respectively. Alternatively, both products can be processed beyond the split-off point, as follows: $\begin{array}{lcc}
&\underline{\mathrm{P}} & \underline{Q}\
\text { Separable processing costs } & \$ 15,000 & \$ 35,000 \
\text { Sales price (per gallon) if processed beyond split-off } &\$3&\$4 \
\end{array}$ The joint cost allocated to P under the relative-sales-value method would be:

Question

Quizplus · Accepted Answer

The relative-sales-value method allocates joint costs based on the proportion of sales value at split-off. The sales value at split-off for P is 20,000 gallons * $2.20 = $44,000, and for Q is 60,000 gallons * $2.60 = $156,000. The total sales value is $44,000 + $156,000 = $200,000. The proportion for P is $44,000 / $200,000 = 0.22. Therefore, the joint cost allocated to P is 0.22 * $80,000 = $17,600.

Garage Specialty Corporation Manufactures Joint Products P and Q The Joint Cost Allocated to P Under the Relative-Sales-Value Method