Agnew Chemical Company makes three products, B7, K6, and X9, which are joint pro
ID: 2417308 • Letter: A
Question
Agnew Chemical Company makes three products, B7, K6, and X9, which are joint products from the same materials. In a standard batch of 150,000 pounds of raw materials, the company generates 35,000 pounds of B7, 75,000 pounds of K6, and 40,000 pounds of X9. A standard batch costs $600,000 to produce. The sales prices per pound are $6, $10, and $16 for B7, K6, and X9, respectively. Allocate the joint product cost among the three final products using weight as the allocation base. Allocate the joint product cost among the three final products using market value as the allocation base. (Round "Allocation rate" to 3 decimal places.)Explanation / Answer
Allocation rate = OH cost / cost driver
Allocation rate = $600000 / 160000
= $ 4
Using weight as allocation base
Product
Allocation rate
X
Weight of base
=
Allocated base
B7
$ 3.75
X
35000
=
131250
K6
$ 3.75
X
75000
=
281250
X9
$ 3.75
X
40000
=
187500
Total allocated cost
600000
Using market value as allocation base
Product
Allocation rate
X
Weight of base
=
Allocated base
B7
$ 6
X
18750
=
112500
K6
$ 10
X
18750
=
187500
X9
$ 16
X
18750
=
300000
Total allocated cost
600000
Product
Allocation rate
X
Weight of base
=
Allocated base
B7
$ 3.75
X
35000
=
131250
K6
$ 3.75
X
75000
=
281250
X9
$ 3.75
X
40000
=
187500
Total allocated cost
600000