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Important information about Joint cost allocation

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A seafood business purchases lobsters and processes them into tails and flakes. It sells the lobster tails for $21 dollars per pound and the flakes for $14 per pound. On average, 100 pounds of lobster are processed into 52 pounds of tails and 22 pounds of flakes, with 26 pounds of waste. Assume that the company purchased 2,400 pounds of lobster for $4.50 per pound and processed the lobsters with an additional labor cost of $1,800. No materials or labor costs are assigned to the waste. If 1,096 pounds of tails and 324 pounds of flakes are sold what is the allocated cost of the sold items? What is the allocated costs of ending inventory? The company allocates joint costs on a market value basis. Round the dollar cost per pound to the nearest thousandth; i.e nearest half-penny.

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Total pounds of tail produced = 52/100 X 2,400 = 1,248 and market value = 1,248 X 21 = $26,208
Total pounds of flakes produced = 22/100 X 2,400 = 528 ...

Solution Summary

The solution explains how to allocate joint costs based on market values