Question

Arkansas Corporation manufactures liquid chemicals A and B from a joint process. It allocates joint costs...

Arkansas Corporation manufactures liquid chemicals A and B from a joint process. It allocates joint costs on the basis of sales value at split-off. Processing 5,900 gallons of product A and 1,400 gallons of product B to the split-off point costs $6,800. The sales value at split-off is $3.00 per gallon for product A and $29.50 per gallon for product B. Product B requires additional separable processing beyond the split-off point at a cost of $2.80 per gallon before it can be sold at a price of $34 per gallon. Required: What is the company’s cost to produce 1,400 gallons of product B?

Homework Answers

Answer #1

Calculation of company cost to produce 1,400 gallons of Product-B:

Product units produced sales price per unit sales value percentage sales value Allocation of cost -$6,800
Product - A 5,900 $3

$17,700

(5,900×$3)

30%

$17,700/$59,000)

$2,040

($6,800×30%)

Product - B 1,400 $29.50

$41,300

(1,400×$29.50)

70%

($41,300/$59,000)

$4,760

($6,800×70%)

Total $59,000 100% $68,00

Product-B;

Allocated joint cost = $4,760

Add: additional processing cost = $3,920

(1,400 × $2.8)

Total cost = $8,680

($,3920 + $4,760)

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