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Arkansas Corporation manufactures liquid chemicals A and B from a joint process. It allocates joint costs...

Arkansas Corporation manufactures liquid chemicals A and B from a joint process. It allocates joint costs on the basis of sales value at split-off. Processing 4,300 gallons of product A and 1,400 gallons of product B to the split-off point costs $5,200. The sales value at split-off is $3.00 per gallon for product A and $21.50 per gallon for product B. Product B requires additional separable processing beyond the split-off point at a cost of $2.80 per gallon before it can be sold at a price of $34 per gallon.

Required:

What is the company’s cost to produce 1,400 gallons of product B?

Solutions

Expert Solution

Answer : Cost to produce 1400 gallons product B = $7560

Calculated as

Calculation of Cost of Product B
Sale value at split off point
Quantity Rate Value at Split off point
Product A 4300 $          3 $                              12,900
Product B 1400 $ 21.50 $                              30,100
$                              43,000
Joint cost at split off point $        5,200
Cost allocated to Product B
=5200 x 30100/43000 $        3,640
Calculation of Total cost of Product B
Cost allocated to Product B $        3,640
Cost incurred after split off $        3,920
Total Cost of Product B $        7,560

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ekkarill92 answered 1 year ago
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