Question

Lowe Co. manufactures products A and B from a joint process. Sales value at split-off was $700,000 for 10,000 units of A and $300,000 for 15,000 units of B. Using the sales value at split-off approach, joint costs properly allocated to A were $140,000. Total joint costs were

Answer 1

Answer:

$200,000

Explanation:

Using the sales value at split-off approach, the allocated costs are proportional to the percentage of total sales that each product is responsible for generating. The percentage of sales that derive from product A are:

$A = \frac{700,000}{700,000+300,000}= 70\%$

Therefore, the total joint costs were:

$C = \frac{C_A}{A}\\ C=\frac{140,000}{0.7}\\ C=\ 200,000$

Total joint costs were $200,000.