Harmon Inc, manufactures two products from a joint process, product A and product B. A standard production run incurs joint costs of $45,000 and results in 1,500 units of product A and 2,500 units of product B. Product A sells for $50.00 per unit and Product B sells for $20.00 per unit. Assuming that no further processing occurs after the split-ff point, how much of the joint costs are allocated to Product A and B using the physical measure method

Harmon Inc.

Joint costs of $45,000 allocated to:

Product A = $16,875

Product B = $28,125

Explanation:

a) Data and Calculations:

Joint costs of a standard production run = $45,000

Joint products        Product A     Product B      Total

Production units       1,500            2,500          4,000

Selling price per unit  $50               $20

Allocation of joint costs based on physical measure method:

Product A = $16,875 (1,500/4,000 * $45,000)

Product B = $28,125 (2,500/4,000 * $45,000)

b) Joint costs of $45,000 were incurred by Product A and Product B jointly because they consumed the same resources during the production run.  These costs can be allocated to the products based on established criteria, for example, units of products and sales value.  The purpose is to properly account for the joint costs at split-off.

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

answer; how many employees will be needed for jobs in the coming period;