Fudge 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 Y?
A)$30,000
B)$37,500
C)$75,000
D)$250,000

Question

Fudge 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 Y?
A)$30,000 
B)$37,500 
C)$75,000 
D)$250,000

Quizplus · Accepted Answer

Using the relative-sales-value method, we first calculate the total sales value of each product:
Product X = $50 x 10,000 units = $500,000
Product Y = $75 x 5,000 units = $375,000
Product Z = $100 x 3,000 units = $300,000

Next, we determine the percentage of the total sales value each product represents:
Product X = $500,000 ÷ ($500,000 + $375,000 + $300,000) = 0.4545 or 45.45%
Product Y = $375,000 ÷ ($500,000 + $375,000 + $300,000) = 0.3409 or 34.09%
Product Z = $300,000 ÷ ($500,000 + $375,000 + $300,000) = 0.2045 or 20.45%

Finally, we allocate the joint costs based on these percentages:
Product X = 0.4545 x $250,000 = $113,625
Product Y = 0.3409 x $250,000 = $85,225
Product Z = 0.2045 x $250,000 = $51,150

Therefore, the amount of joint costs allocated to Product Y is $85,225, which is answer choice B.

Fudge Company Manufactures Three Products from a Joint Process