Ceradyne Products produces two joint products (A and B). Prior to the split-off

Question

Ceradyne Products produces two joint products (A and B). Prior to the split-off point, the company incurs costs of $5,940. Product A weighs 31 pounds, and Product B weighs 111 pounds. Product A sells for $108 per pound, and Product B sells for $34 per pound.

Based on relative sales values at the split-off point, allocate joint costs to Products A and B. (Round relative sales value proportion to 4 decimal places eg.0.4525 and final answers to 0 decimal places.)

Explanation / Answer

Cost Allocation on the basis of Relative Sales Value:

Sale value of Product A = 31* 108 = $ 3348

Sale value of Product B = 111* 34 = $ 3774

Cost Allocation :

Product A = 3348 / (3348+ 3774) * 5940

= 0.4701 * 5940 = 2792.39

= 2792

Product B = 3774 / (3348+ 3774) * 5940

          = 0.5299 * 5940

          = 3147.61 = 3148

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