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Alomar Company manufactures four products from a joint production process: barlon, selene, plicene, and corsol. The joint costs for one batch are as follows:
| Direct materials | $69,831 |
| Direct labor | 35,261 |
| Overhead | 25,501 |
At the split-off point, a batch yields 1,560 barlon, 3,901 selene, 3,511 plicene, and 4,032 corsol. All products are sold at the split-off point: barlon sells for $14 per unit, selene sells for $21 per unit, plicene sells for $25 per unit, and corsol sells for $36 per unit.
Required:
1. Allocate the joint costs using the physical units method. If required, round your percentage allocation to four decimal places and round allocated costs to the nearest dollar. Note: The total of the allocated cost does not equal to the one provided in the question data due to rounding error.
Allocated Joint Cost Barlon Selene Plicene Corsol Total 2. Suppose that the products are weighted as shown below: Barlon Selene Plicene Corsol Allocate the joint costs using the weighted average method. If required, round your percentage allocation to four decimal places and round allocated costs to the nearest dollar 1.1 2.3 1.6 2.8 Allocated Joint Cost Barlon Selene Plicene Corsol Total
Expert Answer
The total of joint cost = Material + labor + Overhead = 130,593
Phisical weights method : Total Joint cost shall be shared in the ratio of weights or units obtained for each product. i.e more quantity of output, more will be share of joint cost and like that.
Barlon = 130,593 * 1560 / 13004 = 15666
Note ….1560/13004 …………represents ratio of ……..[Barlon units / Total units of all Four products]
Selene = 130,593 * 3901/13004 = 39,176
Picene = 130,593 * 3511/13004 = 35,259
Corsol = 130,593 * 4032/13004 = 40,492
Total = …………………………………… 130,593
Weighted average method : This is also similar to physical weights method. But ratio of quantity shall be taken after multiplying with respective weights. That means relative importance of the product is attached to physical weights.
| Product | Units | Weight | U * W | Ratio | Joint cost |
| Barlon | 1560 | 1.1 | 1716 | 0.0622 | 8123 |
| Selene | 3901 | 2.3 | 8972.3 | 0.3251 | 42456 |
| Plicene | 3511 | 1.6 | 5617.6 | 0.2036 | 26589 |
| Corsol | 4032 | 2.8 | 11289.6 | 0.4091 | 53425 |
| 27595.5 | 130593 |
In the above table …….last column represents the final answer of joint cost allocation for each product.
Ratio = Individual U*W / Total of U*W………..For example for Barlon = 1716 / 27595.6 = 0.0622
Joint cost of Barlon = 130593 * 0.0622, …… for Selene = 130593 * 0.3251………..so on for remaining products.
