Question

Scotland Beauty Products manufactures face cream, body lotion, and liquid soap in a joint manufacturing process. At the split-off point, the company has 300 pounds of face cream, 200 pounds of body lotion, and 300 pounds of liquid soap and has incurred $200,000 in joint costs. Using the physical units method, allocate the joint costs to: a. Face Cream $ b. Body Lotion $ c. Liquid Soap $

Answer 1

Answer:

a. 75,000

b. 50,000

c. 75,000

Step-by-step explanation:

The computation of allocating the joint cost using the physical units method is shown below:

$Allocation\ rate = \frac{Joint\ costs}{Total\ number\ of\ products}$

$= \frac{\ 200,000}{300 + 200 + 300}$

$Allocation\ rate = \frac{200,000}{800}$

= 250

For face cream

$= Unit\ produced\times Allocation\ rate$

= $300\times 250$

= 75,000

For body lotion

$= Unit\ produced\times Allocation\ rate\\\\ = 200\times 250$

= 50,000

For Liquid soap

$= Unit\ produced\times Allocation\ rate\\\\ = 300\times 250$

= 75,000

hence, we simply applied the above formula by multiplying the units produced with the allocation rate so that each one allocation cost could come