Gold Flour (Pvt.) Ltd produces high quality flour for the residents of Massachusetts. The company prepares 3 types of Flour:

• Standard flour sold @ $2,250 per ton.
• Whole wheat flour sold @ $3,000 per ton.
• High fiber flour sold @ $3,500 per ton.

2,000 tons of supreme quality wheat is processed to produce 1,200 tons of standard and 700 tons of whole wheat flour. The joint costs for the production run were $3,800,000. As a by-product 100 tons husk came out of the process as well. It is assumed to be sold at a price of $2 per Kg.

The whole wheat flour can be processed further to produce 650 tons of high fiber flour at a total cost of $500,000. 50 tons of white flour was also obtained that is assumed to be a by-product. It can be sold in the market @ $4/Kg and cost to sell would be $ 150 per ton.

Required:

1. Allocate the joint costs to the products on the basis of physical output.

2. Decided whether or not the whole wheat should be processed to high fiber wheat.

Answer rating: 100% (QA)

1 Product Output Q Ratio Total Joint Cost Allocation Tons A B AB Standard 1200 6316 3800000 ... View the full answer