Agnew Chemical Company makes three products. B7, K6, and X9, which are joint pro
ID: 2426236 • 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.Explanation / Answer
Part A
Weight = quantity/ total quantity
Weight B7 = 35000/150000 =0.233
Weight K6= 75000/150000 =0.50
Weight X9 = 40000/150000 =0.267
Allocated cost B7 = 600,000 x 0.233 = 140,000
Allocated cost K6 = 60,000 x 0.50 = 300,000
Allocated cost X9= 600,000 x 0.267 = 160,000
Part B
Product
Price
Quantity
P x Q
Weight
B7
6
35000
210000
0.13125
K6
10
75000
750000
0.46875
X9
16
40000
640000
0.4
1600000
Product
Allocation rate
Weight
allocated cost
B7
600000
0.13125
78750
K6
600000
0.46875
281250
X9
600000
0.4
240000
Product
Price
Quantity
P x Q
Weight
B7
6
35000
210000
0.13125
K6
10
75000
750000
0.46875
X9
16
40000
640000
0.4
1600000