Key Tech makes two primary makes two primary products and a by-product from a jo
ID: 2588207 • Letter: K
Question
Key Tech makes two primary makes two primary products and a by-product from a joint process. They have a constant ratio at to input quantities of Direct Materials. Key uses the physical-volume method for allocating joint heir two primary products. Before allocating the joint costs, the value of its by-product is used to uce the joint production costs to be allocated to the primary products. This month Key incurred joint production costs of $270,000. The primary products are not marketable at split-off and must be processed further. Production data for the month are presented below. Output in Pounds Price/Pound Prod. 1 12,000 $ 33 Prod. 2 18,000 $ 16 By-Porduct 3,000 $ 10 Separable Costs $ 72,000 $ 90,000 What is the TOTAL amount of costs to be allocated to each product using the physical-volume method to allocate the joint production costs? Product 1 Product 2Explanation / Answer
Calculate total allocated cost under physical volume method :
Joint cost = 270000
By product revenue = 3000*10=30000
Allocable joint cost = (270000-30000)=240000
Product 1 = 240000*12000/30000= 96000
Product 2 = 240000*18000/30000= 144000
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