A granary allocates the cost of unprocessed wheat to the production of feed, flour, and starch. For the current period, unprocessed wheat was purchased for $240,000, and the following quantities of product and sales revenues were produced. Product Pounds Price per Pound
Feed 100,000 $0.70
Flour 50,000 2.20
Starch 20,000 1.00

How much of the $240,000 cost should be allocated to feed?

a. $24,500.
b. $84,000.
c. $90,000.
d. $70,000.
e. $200,000.

$84,000

Explanation:

A granny allocates the costs of unprocessed wheat to production of feed, flour and starch

The unprocessed wheat was bought at the price of $240,000

The first step is to calculate the total amount of the products(feed, flour and starch)

Feed= 100,000×0.70= 70,000

Flour= 50,000×2.0= 110,000

Starch= 20,000×1.0= 20,000

Total cost= 70,000+110,000+20,000

= $200,000

Therefore, the amount that should be allocated to the feed can be calculated as follows

= $70,000/$200,000×$240,000

= 0.35×$240,000

= $84,000

Hence the cost that should be allocated to the feed is $84,000

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