Budde Chemicals produces two industrial chemical compounds,X15 and Z24,from the same process,which last year cost $600,000.Budde produced 10,000 gallons of X15,which sells for $40 per gallon and 40,000 gallons of Z24,which sells for $20 per gallon.Using the relative sales method,how much of the joint cost should be allocated to X15?

Question

Quizplus · Accepted Answer

The relative sales method allocates joint costs based on the proportion of sales revenue generated by each product. In this case, the total sales revenue from X15 is $400,000 (10,000 gallons x $40/gallon), while the total sales revenue from Z24 is $800,000 (40,000 gallons x $20/gallon). Therefore, X15 represents 1/3 of the total sales revenue ($400,000/$1,200,000), and should be allocated 1/3 of the joint cost, which is $200,000 ($600,000 x 1/3). Therefore, the answer is A) $200,000.

Budde Chemicals Produces Two Industrial Chemical Compounds,X15 and Z24,from the Same