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Myers Quarry produces gravel and sand in an 8.2 ratio. Joint costs for a month (volume = 9,000 tons and rock input) amount to $225,0000. Values at the split-off point are $30 per ton for gravel and $40 per ton for sand.

a. Allocate joint costs to the two products using the relative sales value to split off as the allocation basis.

b. Suppose Myers can run the sand through a sieve to remove small rocks and make fine sand used to fill sandboxes. The process will, however, reduce the yield of sand from 1,800 tons to 900 tons. This superior grade of sand ("sandbox" quality) retails for $160 per ton. However, Myer will incur $18,000 to process the sand into "sandbox" quality. Should Myers sell the coarse sand as is or process it further into sandbox quality sand?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M976815

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