General Chemical Company (GCC) manufactures two products as part of a joint process: AI and BI. Joint costs up to the split-off point total $22,000. The joint costs are allocated to Al and B1 in proportion to their relative sales values. At the split-off point, product Al can be sold for $42.000, whereas product BI can be sold for $63,000 Product Al can be processed further to make product A2, at an incremental cost of $38,000, A2 can be sold for $85,000. Product B1 can be processed further to make product B2, at an incremental cost of $48,000. B2 can be sold for $95.000

Joint costs allocated to product Al total:

A. $13,200
B. $22,000
C. $13,500
D. $8.800

The correct answer is option (d).

Explanation:

According to the scenario, computation of the given data are as follows:

Sales price of Product A1 = $42,000

Sales price of Product B1 = $63,000

So, total sales price = $42,000 + $63,000 = $105,000

So percentage of Product A1 sales = ($42,000 ÷ $105,000) × 100

= 40%

So, Joint cost allocated to product A1 = percentage of Product A1  × Joint cost

= $22,000 × 40%

= $8,800

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