Calculating Total Joint Production Cost for Chem-A and Chem-B
What is the total joint production cost for both Chem-A and Chem-B?
Calculate the total joint production cost based on the given data.
Total Joint Production Cost Calculation:
1. Calculate the cost per unit of Chem-Z: $42,000 / 11,250 units = $3.73 per unit.
2. Determine the total cost of Chem-A: $3.73 per unit * 11,250 units = $41,887.50.
3. Add the additional processing costs for Chem-A: $41,887.50 + $22,500 = $64,387.50.
4. Determine the total cost of Chem-B: $42,000 - $41,887.50 = $112.50 (since the cost of Chem-A is subtracted from the total cost of Chem-Z).
5. Calculate the total joint production cost: $64,387.50 + $112.50 = $64,500.
Therefore, the total joint production cost for both Chem-A and Chem-B is $64,500.
In this scenario, Elsa Products processes Chem-Z into two products: Chem-A and Chem-B. Chem-Z costs $42,000 per batch. The joint process produces 11,250 units of Chem-A with a market value of $135,000. Additional processing costs for Chem-A amount to $22,500. The remaining output, Chem-B, has a market value of $45,000.
To calculate the total joint production cost for both Chem-A and Chem-B, we followed the steps outlined above. The total joint production cost is determined by adding up the individual costs of producing Chem-A and Chem-B.
By calculating the cost per unit of Chem-Z and factoring in additional processing costs, we arrived at a total joint production cost of $64,500 for both Chem-A and Chem-B. This calculation provides valuable insights into the overall production cost and helps in making informed decisions regarding pricing and profitability.