Use the following information for the next 8 questions.
HGT Corporation produces four products from a common production process. Selected data from HGT's accounting system for the four products appears below: Joint costs for the accounting period totaled $5,000. Each product line has a different product manager, who is evaluated based on product line profitability. Therefore, each manager is motivated to reduce his / her total product line costs as much as possible. The managers have been given information about potential joint cost allocations using the following three methods: physical output, sales at split-off point, and net realizable value. The managers are comparing the joint cost allocations under each method so that they can give the accountant input about their preferred method(s).
-If HGT allocates joint costs using the physical output method, the total joint cost allocated to standard pillows will be
A) $1,500
B) $1,650
C) $1,250
D) None of the above

Question

Use the following information for the next 8 questions.
HGT Corporation produces four products from a common production process. Selected data from HGT's accounting system for the four products appears below:  Joint costs for the accounting period totaled $5,000. Each product line has a different product manager, who is evaluated based on product line profitability. Therefore, each manager is motivated to reduce his / her total product line costs as much as possible. The managers have been given information about potential joint cost allocations using the following three methods: physical output, sales at split-off point, and net realizable value. The managers are comparing the joint cost allocations under each method so that they can give the accountant input about their preferred method(s).
-If HGT allocates joint costs using the physical output method, the total joint cost allocated to standard pillows will be
A) $1,500 
B) $1,650 
C) $1,250 
D) None of the above

Quizplus · Accepted Answer

The physical output method allocates joint costs based on the proportion of total physical units produced. If the total joint cost is $3,000 and standard pillows represent 50% of the total output, then $1,500 (50% of $3,000) is allocated to standard pillows.

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