Mission Mars Incorporated uses the physical-units method to allocate costs among its three joint products: X, Y, and Z. The following data are available for the period just ended: Joint processing cost: $800,000
Total production: 150,000 pounds
Share of joint cost allocated to X: $160,000
Share of joint cost allocated to Y: $400,000
Which of the following statements is true?
A)The Company would have relied on the sales value of each product when allocating joint costs to X, Y, and Z.
B)The Company produced 30,000 pounds of Z during the period.
C)The Company produced 45,000 pounds of Z during the period.
D)The Company produced 105,000 pounds of Z during the period.
E)The Company produced 150,000 pounds of Z during the period.

Question

Quizplus · Accepted Answer

The total joint processing cost is $800,000, and the allocation to X and Y is $160,000 and $400,000, respectively. This leaves $240,000 for Z. Using the physical-units method, the cost per pound is $800,000/150,000 pounds = $5.33 per pound. Therefore, $240,000/$5.33 per pound = 45,000 pounds of Z were produced.

Mission Mars Incorporated Uses the Physical-Units Method to Allocate Costs