Allocation of Joint Costs using Physical Units Method

Joint Cost Allocation—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 35 12-gauge shotguns and 15 20-gauge shotguns and costs a total of $3,700 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 $35 per gun, after which it is sold for $170 per gun. The additional production process of the 20-gauge shotgun costs $22 per gun, after which it is sold for $142 per gun. Determine the amount of joint production costs allocated to each type of shotgun using the physical units method.

Joint Product Allocation

12-gauge shotgun

20-gauge shotgun

Totals

Answer:

Joint cost allocation

Physical units Joint cost allocated

12-gauge 35 $2,590

20-gauge 15 $1,110

Total 50 $3,700

What is the total joint production costs allocated to the 12-gauge shotgun and 20-gauge shotgun respectively using the physical units method?

The total joint production costs allocated to the 12-gauge shotgun is $2,590 and to the 20-gauge shotgun is $1,110 using the physical units method.