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. Based on this information the total amount of joint cost is?a. $67,200.b. $32,800.c. $12,000.d. $(4,800).

Answer 1

The total amount of joint cost is $32,800

Explanation:

Cost to be allocated ÷ Allocation base = Allocation rate

($40,000 + $44,000) ÷ (4,000 platters + 1,000 cups)

                               = $16.80 per unit

Allocation rate x Weight of the base = amount to allocate

$16.80 x 4,000 units = $67,200 to platters

$16.80 x 1,000 units = $16,800 to cups

                                                            Platters         Cups

Sales                                                  $ 100,000     $12,000

Allocated joint cost                             (67,200)      (16,800)

Further processing cost                          0              (2,000)

Income                                                $32,800      $(6,800)