Answer (A) is correct . First, the final sales prices are estimated: ? Big: 800 gallons*$9/gallon = $7,200 Mini: 200 gallons*$4/gallon = $800.This yields a total sales value at split-off for the entire production run of $8,000 ($7,200 Big + $800 Mini). The next step is to multiply the joint costs of $5,000 ($2,000 input cost + $3,000 processing cost) based on the proportion of the total final sales value represented by each product: Big: $5,000*($7,200/$8,000) = $4,500 Mini: $5,000* ($800/$8,000) = $500.The per-unit cost of producing Big using the sales value at split-off method is therefore $5.63 ($4,500 allocated joint cost/800 gallons)
Answer (B) is incorrect because The amount of $5.00 results from dividing total joint costs by total output; in other words, a physical-volume method was used rather than the sales value method.
Answer (C) is incorrect because The amount of $4.50 results from dividing by 1,000 gallons of total output.
Answer (D) is incorrect because The amount of $3.38 results from allocating only the processing costs rather than the total joint costs.
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If Tucariz uses the sales-value-at-split-off method to allocate joint costs to the final products, the per gallon cost (rounded to the nearest cent) of producing Big is
