Question

Walton Chemical Company makes three products, B7, K6, and X9, which are joint products from the same materials. In a standard batch of 371,000 pounds of raw materials, the company generates 80,000 pounds of B7, 157,000 pounds of K6, and 134,000 pounds of X9. A standard batch costs $2,968,000 to produce. The sales prices per pound are $6, $12, and $14 for B7, K6, and X9, respectively.

Allocate the joint product cost among the three final products using weight as the allocation base. Product Allocation Rate x Weight of Base = Allocated Cost B7 x = K6 x = X9 x = Total allocated cost Allocate the joint product cost among the three final products using market value as the allocation base. (Round "Allocation rate" to 2 decimal places.) Product Allocation Rate x Weight of Base = Allocated Cost B7 x = K6 x = X9 x = Total allocated cost

Answer 1

a)		Allocation	*	Weight of	=	Allocated
	product	rate		Base		cost
	B7	8	*	80,000	=	640000
	K6	8	*	157,000	=	1256000
	X9	8	*	134,000	=	1072000
	Total allocated cost					2968000
	allocation rate =Standard batch costs to produce/standard batch of raw materials
			2,968,000/371000
			8
b)
		Allocation	*	Weight of	=	Allocated
	product	rate		Base		cost
	B7	0.7	*	480,000	=	336000
	K6	0.7	*	1,884,000	=	1318800
	X9	0.7	*	1,876,000	=	1313200
	Total allocated cost					2968000
	Calcualtion of Allocated rate
		pounds	sales	Market
	product	genrated	price	value
		A	B	C=A*B
	B7	80,000	6	480000
	K6	157,000	12	1884000
	X9	134,000	14	1876000
	total	371,000		4240000
	allocation rate = 2968,000/4,240,000
			0.7