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 $320,000, and the following quantities of product and sales revenues were produced. Product Pounds Price per pound Feed 100,000 $ 1.60 Flour 72,000 2.50 Starch 40,000 1.50 How much of the $320,000 cost should be allocated to flour if the value basis is used

Answer 1

Answer:

the cost that should be allocated to flour is $144,000

Explanation:

The computation is shown below:

Particulars    Total value

Feed       (100,000 × $1.60)  = $160,000

Flour        (72,000 × $2.50) = $180,000

Starch      (40,000 × $1.50) = $60,000

Total        $400,000

Now the allocation made to flour is

= $180,000 ÷ $400,000 × $320,000

= $144,000

Hence, the cost that should be allocated to flour is $144,000