The Whole Grain Company produces three products from harvesting whole grains. To harvest the whole grain, it incurs costs of $30,000. The company allocates joint costs using the value basis method. Using the chart shown, how much of the joint product costs should be allocated to the Cake Mix product?

 The Whole Grain Company produces three products from harvesting whole grains. To harvest the whole grain, it incurs costs of $30,000. The company allocates joint costs using the value basis method. Using the chart shown, how much of the joint product costs should be allocated to the Cake Mix product?

 
Grain-Based Product    Pounds Produced    Sales
Value
Bread    12,000    $ 50,000
Cake Mix    10,000    20,000
Pasta    15,000    30,000
Totals    37,000    $ 100,000
multiple choice
$15,000
$20,000
$6,000 Correct
$10,000

Explanation
Allocation of joint product costs to Cake Mix product = ($20,000 Sales value of Cake Mix ÷ Total sales values of $100,000) × Joint product costs of $30,000 = $6,000.