Answer (B) is correct . The gross market value of Alfa is $40,000 (10,000 pounds × $4), Betters has a total gross value of $50,000 (5,000 pounds × $10), and Morefeed has a split- off value of $3,000. If the value of Morefeed is inventoried and treated as a reduction in joint cost, the allocable joint cost is $90,000 ($93,000 – $3,000). The total gross value of the two main products is $90,000 ($40,000 + $50,000). Of this total value, $40,000 should be allocated to Alfa [($40,000 ÷ $90,000) × $90,000].
Answer (A) is incorrect because The amount of $36,000 is based on 40%, not 4/9.
Answer (C) is incorrect because The amount of $41,333 fails to adjust the joint cost by the value of the by-product.
Answer (D) is incorrect because The amount of $50,000 is the joint cost allocated to Betters.
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Assuming Atlas Foods inventories Morefeed, the by-product, and that it incurs no additional processing costs for Alfa and Betters, the joint cost to be allocated to Alfa using the gross market value method is