Upton Company Produces Two Main Products and a By-Product Out

question 104

Multiple Choice

Upton Company produces two main products and a by-product out of a joint process. The ratio of output quantities to input quantities of direct material used in the joint process remains consistent from month to month. Upton has employed the physical quantities method to allocate joint production costs to the two main products. The net realizable value of the by-product is used to reduce the joint production costs before the joint costs are allocated to the main products. Data regarding Upton's operations for the current month are presented in the chart below. During the month, Upton incurred joint production costs of $2,520,000. The main products are not marketable at the split-off point and, thus, have to be processed further.
$\begin{array}{lrrrr} &\text { First Main } & \text { Second Main }\\& \text { Product } & \text { Product } &\text { By-Product }\\\text { Monthly output in pounds } & 90,000 & 150,000&60,000 \\\text { Selling Price per pound } & \$ 30 & \$ 14&\$2 \\\text { Separable process costs } & \$ 540,000 & \$ 660,000\end{array}$

The amount of joint production cost that Upton would allocate to the Second Main Product by using the physical quantities method to allocate joint production costs would be:

• A) $1,200,000.
• B) $1,260,000.
• C) $1,500,000.
• D) $1,575,000.

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Definitions:

Critical Value

A threshold in hypothesis testing that defines the boundary or cutoff for deciding whether to reject the null hypothesis.

Null Hypothesis

A statistical hypothesis that suggests there is no effect or no difference, and it serves as the default position that there is no association between two measured phenomena.

One-way ANOVA

A statistical method used to compare the means of three or more independent groups to determine if there is a statistically significant difference among them.

F-ratio

The F-ratio is a statistic used in analysis of variance (ANOVA) to compare the variability between groups to the variability within groups, assessing whether group means are significantly different.