Question

Choi Company manufactures two skin care lotions, Smooth Skin and Silken Skin, from a joint process. The joint costs incurred are $340,000 for a standard production run that generates 140,000 pints of Smooth Skin and 180,000 pints of Silken Skin. Smooth Skin sells for $3.60 per pint, while Silken Skin sells for $5.30 per pint. (Do not round intermediate calculations. Round final answers to nearest whole dollar amounts.) Required: 1. Assuming that both products are sold at the split-off point, how much of the joint cost of each production run is allocated to Smooth Skin using the relative sales value method

Answer 1

Answer:

Product           Quantity  Selling price    Sales value

                          Pint                $                      $

Smooth skin    140,000         3.60            504,000

Silken skin       180,000          5.30           954,000

                         320,000                           1,458,000

The amount of joint cost to be apportioned to smooth skin                                                                                            

= $504,000/$1,458,000 x $340,000

= $117,531

Explanation:

There is need to determine the sales value for each product by multiplying the quantity of pint sold by respective selling prices. Then, we will compute the total sales value. The amount of joint cost that will be allocated to sooth skin is the ratio of sales of smooth skin to the total sales value multiplied by the joint costs incurred.