Question

A granary allocates the cost of unprocessed wheat to the production of feed, flour, and starch. For the current period, unprocessed wheat was purchased for $120,000, and the following quantities of product and sales revenues were produced. Product Pounds Price per pound Feed 100,000 $ 0.70 Flour 50,000 2.20 Starch 20,000 1.00 How much of the $120,000 cost should be allocated to flour if the value basis is used?

Answer 1

Answer:

Allocated cost = $66,000

Explanation:

Total sales value for the three products

= (100,000× $0.70)  + (50,000× $2.20) + (20,000 × $1.00)

=  $200,000.

Joint cost allocated to Flour

= sales value of flour / total sales value × Joint cost

=  (50,000× $2.20)/200,000.×120,000

=$ 66,000.00