Oak View Chemicals produces two main products. M-10 and M-20, and one by-product, B-60, from a single input. Chem-X. Products M-10 and M-20 can either be sold at split-off or processed further and sold. A given batch begins with 1,000 gallons of Chem-X with a cost of $90,000. Additional information regarding a batch follows. Oak View Chemicals uses the net realizable at split-off approach to allocate joint costs and treats the sales value of the by-product B-60 as other income. If processed further Product Units produced Units sales value at split off Additional Cost(per unit) Sales value(per unit) M-10 20000 $ 5.00 $ 2.00 $ 6.00 M-20 14000 $ 10.00 $ 4.00 $ 16.00 B-60 5000 $ 0.50 NA NA Required The joint cost allocated to product M-10 at Oak View Chemicals for a given batch is: $55.000 $39.600 $38,500 $33,371 None of the above.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

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Oak View Chemicals produces two main products. M-10 and M-20, and one by-product, B-60, from a single input. Chem-X. Products M-10 and M-20 can either be sold at split-off or processed

further and sold. A given batch begins with 1,000 gallons of Chem-X with a cost of $90,000. Additional information regarding a batch follows.

Oak View Chemicals uses the net realizable at split-off approach to allocate joint costs and treats the sales value of the by-product B-60 as other income.

			If processed further
Product	Units produced	Units sales value at split off	Additional Cost(per unit)	Sales value(per unit)
M-10	20000	$ 5.00	$ 2.00	$ 6.00
M-20	14000	$ 10.00	$ 4.00	$ 16.00
B-60	5000	$ 0.50	NA	NA

Required

The joint cost allocated to product M-10 at Oak View Chemicals for a given batch is:

$55.000
$39.600
$38,500
$33,371
None of the above.

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