Question

Atkins Farms makes two products from their apples: apple pies and apple donuts. From a standard batch of 50,000 pounds of apples, Atkins produces 10,000 pounds of apple pies and 40,000 pounds of apple donuts. Producing a standard batch costs $18,000. The sales price per pound are $5 for pies and $2 for apple donuts.

1. Allocate the joint product cost to the two products using weight as the allocation base.

2. Allocate the joint product cost to the two products using market value as the allocation base.

Label and place your final answer for 1 and 2 at the top of the answer box. Then after the answer to 2, label and show your work for each part of the question. Just show me numbers - that is usually enough for me to follow your logic.

Answer 1

Answer 1 Allocation of the joint cost on weight basis

Cost Allocated to Apple Pie = $3600

Cost Allocated to Apple Donuts = $14400

Answer 2 Allocation of the joint cost on Market value basis

Cost Allocated to Apple Pie = $6923 (Rounded off to nearest dollar)

Cost Allocated to Apple Donuts = $11077 (Rounded off to nearest dollar)           

Above answers are calculated as following

Answer 1 Allocation of the joint cost on weight basis

Weight of Apple pie = 10000 Pounds

Weight of Apple Donuts = 40000 Pounds

Total Weight = 50000 Pounds

Allocation

Cost Allocated to Apple Pie = $18000*10000/50000 = $3600

Cost Allocated to Apple Donuts = $18000*40000/50000 = $14400

Answer 2 Allocation of the joint cost on Market value basis

Market value of Apple Pie = $5*10000 = $50000

Market value of Apple Donuts = $2*40000 = $80000

Total Market Value = $50000+$80000 = $130000

Cost Allocated to Apple Pie = $18000*50000/130000 = $6923 (Rounded off to nearest dollar)

Cost Allocated to Apple Donuts = $18000*80000/130000 = $11077 (Rounded off to nearest dollar)

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