Question

Ferrier Chemical Company makes three products, B7, K6, and X9, which are joint products from the same materials. In a standard batch of 150,000 pounds of raw materials, the company generates 35,000 pounds of B7, 75,000 pounds of K6, and 40,000 pounds of X9. A standard batch costs $600,000 to produce. The sales prices per pound are $6, $10, and $16 for B7, K6, and X9, respectively. Required Allocate the joint product cost among the three final products using weight as the allocation base. Allocate the joint product cost among the three final products using market value as the allocation base.

Answer 1

1. allocation of joint product cost among the three final products using weight as allocation base.

formula = (product weight / total weight) * total cost

allocation to B 7 (35,000 pounds / 150,000 pounds * $600,000)	$140,000
to K6 (75,000 / 150,000 * $600,000)	$300,000
to X9 (40,000/150,000) * $600,000	$160,000
total	$600,000

2.allocation of joint cost baed on market value:

allocation = (product market value / total market value) * total cost

product	market value	allocation
B7	($6 * 35,000) =>$210,000	(210,000/1600000)*600,000=>78,750
K6	($10*75,000)=>$750,000	(750,000/1,600,000)*600,000=>281,250
X9	($16*40,000)=>$640,000	(640,000/1,600,000)*600,000=>240,000
Total	$1,600,000	$600,000