Shelly Inc. manufactures Nuts and Bolts. The initial stages of manufacturing inv
ID: 2707526 • Letter: S
Question
Shelly Inc. manufactures Nuts and Bolts. The initial stages of manufacturing involve joint costs totally $50,000. At the split-off point we have 4,000 lbs. of Nuts which can sell for $18 per pound and 6,000 lbs. of Bolts which can sell for $13.50 per pound.
Required: (1 pt each)
1. Assuming joint costs are allocated using relative salves value, what amount of joint cost should be allocated to Nuts?
2. Assuming joint costs are allocated using relative salves value, what amount of joint cost should be allocated to Bolts?
3. Assuming joint costs are allocated using physical units, what amount of joint cost should be allocated to Nuts?
4. Assuming joint costs are allocated using physical units, what amount of joint cost should be allocated to Bolts?
Shelly Inc. manufactures Nuts and Bolts. The initial stages of manufacturing involve joint costs totally $50,000. At the split-off point we have 4,000 lbs. of Nuts which can sell for $18 per pound and 6,000 lbs. of Bolts which can sell for $13.50 per pound.Explanation / Answer
1. Assuming joint costs are allocated using relative salves value, what amount of joint cost should be allocated to Nuts?
Total Sale value = 4000*18 + 6000*13.50 = 153000
So JC for Nuts = 50000*(4000*18/153000) = $23,529
2. Assuming joint costs are allocated using relative salves value, what amount of joint cost should be allocated to Bolts?
So JC for Bolt = 50000*(6000*13.5/153000) = $26,471
3. Assuming joint costs are allocated using physical units, what amount of joint cost should be allocated to Nuts?
Total Qty = 4000+6000 = 10000
So JC for Nuts = 50000*4000/10000 = $20,000
4. Assuming joint costs are allocated using physical units, what amount of joint cost should be allocated to Bolts?
So JC for Bolts = 50000*6000/10000 = $30,000
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