ExpertMedium2 marksMultiple Choice
ACCA · Question 19 · C. Cost accounting techniques
A pharmaceutical company processes a raw chemical that yields two joint products: Alpha and Beta. The joint processing costs up to the split-off point are $100,000.
At the split-off point, 10,000 liters of Alpha are produced with a sales value of $8 per liter, and 5,000 liters of Beta are produced with a sales value of $4 per liter.
If joint costs are apportioned based on sales value at the split-off point, how much joint cost is apportioned to Product Beta?
A pharmaceutical company processes a raw chemical that yields two joint products: Alpha and Beta. The joint processing costs up to the split-off point are $100,000.
At the split-off point, 10,000 liters of Alpha are produced with a sales value of $8 per liter, and 5,000 liters of Beta are produced with a sales value of $4 per liter.
If joint costs are apportioned based on sales value at the split-off point, how much joint cost is apportioned to Product Beta?
Answer options:
A.
$20,000
B.
$33,333
C.
$50,000
D.
$80,000
How to approach this question
1. Calculate total sales value for both products. 2. Find Beta's percentage of the total sales value. 3. Apply that percentage to the total joint costs.
Full Answer
A.$20,000✓ Correct
1. Sales value of Alpha = 10,000 * $8 = $80,000.
2. Sales value of Beta = 5,000 * $4 = $20,000.
3. Total sales value = $100,000.
4. Beta's proportion = $20,000 / $100,000 = 20%.
5. Joint cost apportioned to Beta = 20% * $100,000 = $20,000.
Common mistakes
Apportioning based on physical units (liters) instead of sales value, which would lead to $33,333.
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