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Data pertaining to a company's joint production for the current period follows:


L M

Quantities produced 200 lbs. 150 lbs.

Market value at split-off point $8/lb. $16/lb.

Compute the cost to be allocated to Product M for this period's $660 of joint costs if the value basis is used


A. $264.

B. $396.

C. $330.

D. $1,364.

E. $796.

Respuesta :

Answer:

B. $396.

Explanation:

The allocation of the cost to product M is shown below:

Total cost of product L would be

= 200 lbs × $8 per lb

= $1,600

Total cost of product M would be

= 150 lbs × $16 per lb

= $2,400

The total joint cost would be

= $1,600 +2,400

= $4,000

Now the cost allocated for product M would be

= Product M cost ÷ Total Joint cost × Joint cost

= $2,400 ÷ $4,000 × 660

= $396

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