Corker Company manufactures three products from a joint process.Joint costs for the year amounted to $250,000.The following data was available: Assume the relative-sales-value method of allocating joint costs is used.What amount of joint costs is allocated to Product X?
A)$70,000
B)$87,500
C)$125,000
D)$250,000

Question

Corker Company manufactures three products from a joint process.Joint costs for the year amounted to $250,000.The following data was available:  Assume the relative-sales-value method of allocating joint costs is used.What amount of joint costs is allocated to Product X?
A)$70,000 
B)$87,500 
C)$125,000 
D)$250,000

Quizplus · Accepted Answer

Using the relative-sales-value method, each product's joint cost allocation is based on its sales value at the split-off point as a percentage of the total sales value of all products at the split-off point.

Product X's sales value at split-off point = $100,000
Product Y's sales value at split-off point = $200,000
Product Z's sales value at split-off point = $400,000

Total sales value at split-off point = $700,000

Product X's joint cost allocation = $250,000 x ($100,000 / $700,000) = $35,714.29
Product Y's joint cost allocation = $250,000 x ($200,000 / $700,000) = $71,428.57
Product Z's joint cost allocation = $250,000 x ($400,000 / $700,000) = $142,857.14

Therefore, the amount of joint costs allocated to Product X is $35,714.29 or approximately $87,500 rounded to the nearest dollar. The correct answer is B.

Corker Company Manufactures Three Products from a Joint Process