Question

Laredo manufactures Nuts and Bolts from a joint process (cost = $90,000). 6,000 pounds of Nuts...

Laredo manufactures Nuts and Bolts from a joint process (cost = $90,000). 6,000 pounds of Nuts can be sold at split-off for $25 per pound; 15,000 pounds of Bolts can be sold at split-off for $20 per pound. For product costing purposes Laredo allocates joint costs using the relative sales value method.

The amount of joint cost allocated to Nuts would be:

$60,000.

$36,000.

$30,000.

$90,000.

$96,000.

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Answer #1

Sales value for Nuts = 6000*25 = 150000

sales value for Bolts = 15000*20 = 300000

Total sales value = 150000+300000= 450000

joint cost allocated to Nuts = joint cost * sale value for nuts /total sales value

                    90000* 150000/450000

                       30000

correct option is "C"

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