Question

The Silver Center (TSC) produces cups and platters. TSC purchases silver and other metals that are processed into silver alloy that is used to make platters and cups. TSC incurred $40,000 of materials cost and $44,000 of labor cost to produce the silver alloy. Platters are made first and the residual alloy is remixed into a lower grade silver plated material that is used to make the cups. Remixing cost amount to $2,000. The recent batch contained 4,000 platters and 1,000 cups. TSC sold the platters for $100,000 and the cups for $12,000. If number of units is used to allocate the joint cost, what is the income earned for platters?
a. $67,200.
b. $32,800.
c. $12,000.
d $(4,800).

Answer 1

Answer:

Income Earned for platters=$32,800

Option B is Correct ($32,800)

Explanation:

First we will calculate the cost Allocated to both cups and platter:

Allocation rate= $\frac{Total\ Cost\ incurred }{Total\ Units}$

Allocation rate=$\frac{\ 40,000+\ 44,000}{4000+1000}$

Allocation rate=$16.8

Amount Allocated for Platters= Units of platter* Allocation rate

Amount Allocated for Platters= 4000*$16.8

Amount Allocated for Platters= $67,200.

Calculating Income for platters:

Sales of platters=$100,000

Remixing Cost for platters= $0

Income Earned for platters=Sales of platters-Amount Allocated for Platters-Remixing Cost for platters

Income Earned for platters=$100,000-$67,200-$0

Income Earned for platters=$32,800

Option B is Correct ($32,800)