Vanguard Company makes three products, M, N, and P, which come from a joint process. The joint costs for each batch of the products are: $80,000 for direct materials, $40,000 for direct labor, and $30,000 for indirect costs (overhead). Each batch produces 10,000 pounds of product M with a market value of $6 per pound; 5,000 pounds of N with a market value of $12 per pound; and 9,000 pounds of P with a market value of $10 per pound.Required:1) Determine the total amount of joint cost allocated to each of the products, assuming that the allocation is based on the weight of products produced. (Do not round intermediate calculations. Round each of your final answers to the nearest whole dollar.)2) Determine the total amount of joint cost allocated to each of the products, assuming that the

Question

allocation is based on the market value of the products. (Do not round intermediate calculations. Round each of your final answers to the nearest whole dollar.)

What will be an ideal response?

Answer 1

1) Total quantity = 10,000 + 5,000 + 9,000 = 24,000 pounds
Total joint costs = $80,000 + $40,000 + $30,000 = $150,000
Joint cost per pound = $150,000 ÷ 24,000 = $6.25
Amount of joint cost allocated to:
Product M: $6.25 × 10,000 = $62,500
Product N: $6.25 × 5,000 = $31,250
Product P: $6.25 × 9,000 = $56,250

2) Total market value = (10,000 × $6) + (5,000 × $12) + (9,000 × $10) = $210,000
Total joint cost allocated to:
Product M: $150,000 × $60,000 ÷ $210,000 = $42,857
Product N: $150,000 × $60,000 ÷ $210,000 = $42,857
Product P: $150,000 × $90,000 ÷ $210,000 = $64,286