Wren Pork Company uses the relative market value method of allocating joint costs in its production of pork products.Relevant information for the current period follows: The total joint cost for the current period was $43,000.How much of this cost should Wren Pork allocate to Loin chops?
A)$0.
B)$5,909.
C)$8,600.
D)$10,750.
E)$43,000.

Question

Wren Pork Company uses the relative market value method of allocating joint costs in its production of pork products.Relevant information for the current period follows:  The total joint cost for the current period was $43,000.How much of this cost should Wren Pork allocate to Loin chops?
A)$0. 
B)$5,909. 
C)$8,600. 
D)$10,750. 
E)$43,000.

Quizplus · Accepted Answer

To use the relative market value method, we need to know the total sales value for all products and the percent of that value contributed by each product.

From the information given, we know that the total sales value for all products is $155,000.

To find the percent of sales value contributed by each product, we divide each product's sales value by the total sales value:

- Loin Chops: $30,000 / $155,000 = 0.1935, or 19.35%
- Spare Ribs: $25,000 / $155,000 = 0.1613, or 16.13%
- Ground Pork: $20,000 / $155,000 = 0.1290, or 12.90%
- Sausage: $45,000 / $155,000 = 0.2903, or 29.03%
- Bacon: $35,000 / $155,000 = 0.2258, or 22.58%

These percentages represent each product's "joint cost allocation ratio" - in other words, the percent of joint costs that should be allocated to each product.

To find the allocated joint costs for each product, we multiply the total joint cost ($43,000) by the joint cost allocation ratio for that product:

- Loin Chops: 0.1935 x $43,000 = $8,326.50 (rounded to $8,600)
- Spare Ribs: 0.1613 x $43,000 = $6,935.90 (rounded to $6,909)
- Ground Pork: 0.1290 x $43,000 = $5,547.00 (rounded to $5,547)
- Sausage: 0.2903 x $43,000 = $12,478.90 (rounded to $12,479)
- Bacon: 0.2258 x $43,000 = $9,685.40 (rounded to $9,685)

Therefore, the answer is C) $8,600.

Wren Pork Company Uses the Relative Market Value Method of Allocating