Question

Benson Chemical Company makes three products, B7, K6, and X9, which are joint products from the same materials. In a standard batch of 386,300 pounds of raw materials, the company generates 73,200 pounds of B7, 166,700 pounds of K6, and 146,400 pounds of X9. A standard batch costs $2,317,800 to produce. The sales prices per pound are $5, $15, and $20 for B7, K6, and X9, respectively. Trying to figure out part 2. I'm continuing to get 0.548 for allocated Rate

Required

1. Allocate the joint product cost among the three final products using weight as the allocation base.

2. Allocate the joint product cost among the three final products using market value as the allocation base.

Answer 1

Statement showing the allocation of joint product cost using weight as the allocation base:

Product	Allocation rate($)	×	Output generated	=	Allocated costs
B7	6	×	73,200	=	439,200
K6	6	×	166,700	=	1,000,200
X9	6	×	146,400	=	878,400
Total allocated costs					2,317,800

Working notes

Total pounds of all products generated =

=(73,200 + 166,700 + 146,400) pounds

= 386,300 pounds

So allocation rate = 2,317,800/386,300 = $ 6 per pound

Statement showing the allocation of joint product cost using market value as the allocation base:

Product	Allocation rate(%)	×	Market Value	=	Allocated costs
B7	40%	×	366,000	=	146,400
K6	40%	×	2,500,500	=	1,000,200
X9	40%	×	2,928,000	=	1,171,200
Total allocated costs					2,317,800

Working notes

Total Market value =

B7 =73,200 × 5=$ 366,000

K6 = 166,700 × 15=$ 2,500,500

X9 = 146,400 × 20 =$ 2,928,000

Total = $366,000 + 2,500,500 + 2,928,000) =$ 5,794,500

Allocation base = 2,317,800/5,794,500 × 100 = 40% of market value

OR

Alternative way to calculate using market value =

% of revenue =

B7 =366,000/5,794,500×100 = 6.31633445508%

K6 =2,500,500/5,794,500×100 = 43.152989904%

X9 =2,928,000/5,794,500×100 = 50.53067564%

Allocated cost :

B7 =2,317,800 × 6.31633445508% =$ 146,400

K6 =2,317,800 × 43.152989904% =$ 1,000,200

X9 = 2,317,800 × 50.53067564% = $ 1,171,200