A granary allocates the cost of unprocessed wheat to the production of feed, flour, and starch. For the current period, unprocessed wheat was purchased for $120,000, and the following quantities of product and sales revenues were produced. Product Pounds Price per pound Feed 100,000 $ 0.70 Flour 50,000 2.20 Starch 20,000 1.00 How much of the $120,000 cost should be allocated to flour if the value basis is used?

Question

Augustus Golden

Business

7 August, 10:22

A granary allocates the cost of unprocessed wheat to the production of feed, flour, and starch. For the current period, unprocessed wheat was purchased for $120,000, and the following quantities of product and sales revenues were produced. Product Pounds Price per pound Feed 100,000 $ 0.70 Flour 50,000 2.20 Starch 20,000 1.00 How much of the $120,000 cost should be allocated to flour if the value basis is used?

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Answers (1)

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Spears · Answer 1

Allocated cost = $66,000

Explanation:

Total sales value for the three products

= (100,000 * $0.70) + (50,000 * $2.20) + (20,000 * $1.00)

= $200,000.

Joint cost allocated to Flour

= sales value of flour / total sales value * Joint cost

= (50,000 * $2.20) / 200,000.*120,000

=$ 66,000.00