Isthmus Corporation 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) Ithaca produced 30,000 pounds of Z during the period.
C) Ithaca produced 45,000 pounds of Z during the period.
D) Ithaca produced 105,000 pounds of Z during the period.
E) Based on the data presented, it is not possible to determine Ithaca's production of Z during the period.

Question

Quizplus · Accepted Answer

The total joint cost is $800,000, and the costs allocated to X and Y are $160,000 and $400,000, respectively. This leaves $240,000 for Z. Using the physical-units method, the allocation is based on the proportion of total production. Since the total production is 150,000 pounds, and the cost for Z is $240,000, Z's production is 45,000 pounds (since $240,000/$800,000 = 45,000/150,000).

Isthmus Corporation Uses the Physical-Units Method to Allocate Costs Among