Weighted Average Method--Allocating Joint Product Cost:
Learning Objectives:
- Explain the procedure of allocating
joint product cost when weighted average method is used.
many industries, the previously described
methods do not give a satisfactory answer to the
joint cost apportionment problem. For this reason, weight factors are
often assigned to each unit, based upon size of the unit, difficulty of
manufacture, time consumed in making the unit, difference in type of labor
employed, amount of materials used etc. Finished production of every kind is
multiplied by weight factors to apportion to total
joint cost to individual units.
Using figures from the
average unit cost method page, weight factors assigned to the four
products might be as follows:
Example:
|
Product A
|
3
Points |
|
Product B
|
12
Points |
|
Product C
|
13.5
Points |
|
Product D
|
15
Points |
The joint production cost allocation would
result in these values:
|
Product |
Units × |
Points = |
Weighted Units |
× Cost Per Units*
=
|
Joint Production Cost |
|
A |
20,000 |
3 |
60,000 |
0.20 |
$12,000 |
|
B |
15,000 |
12 |
180,000 |
0.20 |
$36,000 |
|
C |
10,000 |
13.5 |
135,000 |
0.20 |
$27,000 |
|
D |
15,000 |
15 |
225,000 |
0.20 |
$45,000 |
| |
|
|
------------- |
|
------------ |
| |
|
|
600,000 |
|
$120,000 |
|
|
|
======= |
|
======= |
|
*Total
joint production cost / Total number of weighted units
= $ 120,000 / 600,000
= $0.20 per unit |
|
