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McBride ts Dairy has 200 gallons of cream and 600 gallons of skimmed milk and has...

McBride ts Dairy has 200 gallons of cream and 600 gallons of skimmed milk and has incurred $1,000 of joint costs at the split-off point. It also incorporates a processing time weight factor of 1 for the cream and 3 for the skimmed milk. The amount of this cost that will be allocated to cream using the weighted average method is

  1. $250

  1. $1,000

  1. $900

  1. $100

15. MC.19.125

McBride's Dairy has 200 gallons of heavy cream and 600 gallons of skimmed milk and has incurred $1,000 of joint costs at the split-off point. It can sell each product at the split-off point or process it further in relatively similar processes, so management has decided that the most appropriate method for allocating joint costs is the market value at split-off point. One gallon of cream sells for $15, while one gallon of milk sells for $4. How much of the joint cost is allocated to cream? Round percentage calculations to the nearest whole percent.

1 $0

2 $560

3 $1,000

4 $440

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Answer #1
Units Time weight factor Weighted units
Cream 200 1 200
Skimmed milk 600 3 1,800
2,000

Total cost to be allocated to cream = 1,000 x 200/2,000

= $100

Fourth option is the correct option.

Units Selling price Sales value Percentage of sales value Allocated cost
Cream 200 15 3,000 3,000/5,400 = 56% 1,000 x 56% = $560
Skimmed milk 600 4 2,400 2,400/5,400 = 44% 1,000 x 44% = $440
Total $5,400 100% $1,000

the joint cost is allocated to cream = $560

Correct option is (2)

kindly give a positive rating if you are satisfied with the solution. do comment if you have any query, Thanks.

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