Answer:
a. $8,800
Explanation:
Joint costs are costs incurred on multiple products to the split off point, beyond which are product costs that are directly traceable.
Hence in the scenario, the relevant information for finding a solution to the question is the following:
1. Joint costs up to the split-off point total $22,000. The joint costs are allocated to A1 and B1 in proportion to their relative sales values.
2. At the split-off point, product A1 can be sold for $42,000, whereas product B1 can be sold for $63,000.
Therefore Joint costs allocated to product A1 total: is [42,000 / (42,000+ 63,000)] x $22,000 = $8,800
Answer:
a. $8,800.
Explanation:
We have to weight the market value at split-off point to get an allocation basis for the 22,000 dollar of common cost:
[tex]\left[\begin{array}{cccc}Product&Sales&Weight&Cost\\a1&42000&0.4&8800\\a2&63000&0.6&13200\\Total&105000&1&22000\\\end{array}\right][/tex]
Once we got the weight, we multiply it by the common cost to get the allocated common cost for each product.
In this case for A1
42,000 / 105,000 = 0.4 weight of A1
Then 22,000 total cost x 0.40 = 8,800
