IPS operates a factory, which produces the MiniY and the MiniX. During September
ID: 2583995 • Letter: I
Question
IPS operates a factory, which produces the MiniY and the MiniX. During September 20X8, the factory produced 3200 units of MiniY and 3000 units of MiniX. The joint cost related to the operation was $3,000,000. MiniX sells for $27,100 per unit and MiniY sells for $25,000 per unit. Allocate the joint costs using the relative sales values of MiniY and MiniX. Question 6: With the costs that you calculate, what is the profit or loss associated with MiniY? NOTE: Assume that the variable and fixed costs mentioned in Step 5 are also applicable to Step 6 when calculating the profit or loss for MiniY
Explanation / Answer
Solution:
Allocation of joint cost
In the question it is given that joint cost is allocated based on the elative sales values of MiniY and MiniX. So we need to calculate first the total sales value and on that basis we need to calculate the percentage of sales to allocate the joint cost.
MiniY
MiniX
Total
Units Produced (A)
3200
3000
Unit Selling Price (B)
$25,000
$27,100
Total Sales Value (A*B)
$80,000,000
$81,300,000
$161,300,000
Joint Cost Allocation % based on sales value (C)
49.60%
(80,000,000 / 161,300,000 x 100)
50.40%
(81,300,000 / 161,300,000 x 100)
Joint Operation Cost (D)
$3,000,000
$3,000,000
Allocation of Joint Cost (C*D)
$1,488,000
(3,000,000*49.60%)
$1,512,000
(3,000,000*50.40%)
$3,000,000
Note -- % of Joint Cost allocation is rounded to 2 decimal places. In case answer is different you can take full %.
Calculation of Profit or loss associated with MiniX and MiniY
MiniY
Sales Value
$80,000,000
Less: Allocated Joint Cost
$1,488,000
Profit
$78,512,000
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
MiniY
MiniX
Total
Units Produced (A)
3200
3000
Unit Selling Price (B)
$25,000
$27,100
Total Sales Value (A*B)
$80,000,000
$81,300,000
$161,300,000
Joint Cost Allocation % based on sales value (C)
49.60%
(80,000,000 / 161,300,000 x 100)
50.40%
(81,300,000 / 161,300,000 x 100)
Joint Operation Cost (D)
$3,000,000
$3,000,000
Allocation of Joint Cost (C*D)
$1,488,000
(3,000,000*49.60%)
$1,512,000
(3,000,000*50.40%)
$3,000,000
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