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HGT Corporation Produces Four Products from a Common Production Process

question 114

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HGT Corporation produces four products from a common production process. Selected data from HGT's accounting system for the four products appears below: Joint costs for the accounting period totalled $5,000. Each product line has a different product manager who is evaluated based on product line profitability. Therefore each manager is motivated to reduce his / her total product line costs as much as possible. The managers have been given information about potential joint cost allocations using the following three methods: physical output, sales at split-off point, and net realizable value. The managers are comparing the joint cost allocations under each method so that they can give the accountant input about their preferred method(s) .
Assume HGT allocates joint costs using the physical output method. Which of the following correctly orders the four product lines from greatest allocation to least allocation?

Definitions:

Option Price

The price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Subscription Contract

An agreement between a provider and a customer for the provision of services or delivery of goods over a specified period in return for payment.

Shares Issued

The total number of a company's shares that have been sold to and held by shareholders.

Par Common Stock

Common stock with a nominal or face value assigned to it, often used in accounting to determine legal capital.