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27 September, 13:39

Cariboo Manufacturing Company incurred a joint cost of $945,000 in the production of X and Y in a joint process. Presently, 2,900 of X and 2,500 of Y are being produced each month. Management plans to decrease X's production by 850 units in order to increase the production of Y by 1,160 units. Additionally, this change will require minor modifications, which will add $64,800 to the joint cost. This cost is entirely attributable to product Y. What is the amount of the joint costs allocable to X and Y before changes to existing production, assuming Cariboo allocates their joint costs according to the proportion of Y and X produced

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  1. 27 September, 15:52
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    the joint cost allocated to X before changes to existing production = $507,500

    and

    the joint cost allocated to Y before changes to existing production = $437,500

    Explanation:

    Given:

    Joint cost incurred by the company = $945,000.

    The number of units of X produced presently = 2,900

    The number of units of Y produced presently = 2,500

    Total joint units produced presently = 2,900 + 2,500 = 5,400 units

    Therefore,

    the total joint cost per joint unit

    = (Joint cost incurred by the company) / (Total joint units produced presently)

    on substituting the respective values, we have

    the total joint cost per joint unit = $945,000 / 5,400 = $175

    Hence,

    the joint cost allocated to X before changes to existing production

    = $ 175 * number of units of X produced presently

    = $175 * 2,900 = $507,500

    and

    the joint cost allocated to Y before changes to existing production

    = $ 175 * number of units of Y produced presently

    = $175 * 2,500 = $437,500
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