Blake’s Blacksmith Co. produces two types of shotguns, a 12-gauge and 20-gauge. The shotguns are made through a joint production process that ultimately produces 30 12-gauge shotguns and 20 20-gauge shotguns and costs a total of $4,000 per batch. After the split-off point, each type of shotgun goes through an additional crafting process before it is sold. The additional production process of the 12-gauge shotgun costs $30 per gun, after which it is sold for $180 per gun. The additional production process of the 20-gauge shotgun costs $25 per gun, after which it is sold for $150 per gun. Determine the amount of joint production costs allocated to each type of shotgun using the physical units method.
Blake’s Blacksmith Co. produces two types of shotguns, a 12-gauge and 20-gauge. The shotguns are made through a joint production process that ultimately produces 30 12-gauge shotguns and 20 20-gauge shotguns and costs a total of $4,000 per batch. After the split-off point, each type of shotgun goes through an additional crafting process before it is sold. The additional production process of the 12-gauge shotgun costs $30 per gun, after which it is sold for $180 per gun. The additional production process of the 20-gauge shotgun costs $25 per gun, after which it is sold for $150 per gun. Determine the amount of joint production costs allocated to each type of shotgun using the physical units method.
Solution Summary: The author explains that cost allocation refers to the process of allocating the costs associated with the production of the products mainly indirectly and are generally ignored.
Blake’s Blacksmith Co. produces two types of shotguns, a 12-gauge and 20-gauge. The shotguns are made through a joint production process that ultimately produces 30 12-gauge shotguns and 20 20-gauge shotguns and costs a total of $4,000 per batch. After the split-off point, each type of shotgun goes through an additional crafting process before it is sold. The additional production process of the 12-gauge shotgun costs $30 per gun, after which it is sold for $180 per gun. The additional production process of the 20-gauge shotgun costs $25 per gun, after which it is sold for $150 per gun. Determine the amount of joint production costs allocated to each type of shotgun using the physical units method.
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