Hurley Processors Processes Clay into Two Joint Products, Molding Foam

question 71

Multiple Choice

Hurley Processors processes clay into two joint products, molding foam and craft blocks.When processed, each pound of clay yields 20 units of foam and 80 units of blocks.Foam sells for $2 per unit and blocks sells for $1.50 per unit.The total cost to process a 100-pound batch of clay is $35.If the physical quantities method is used to allocate the joint costs, how much will be allocated to each batch of craft blocks?

• A)$1.20
• B)$28.00
• C)$8.75
• D)$120.00

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Definitions:

Liquidity Ratio

Measures a company's ability to meet its short-term obligations using its most liquid assets.

Profit Margin

A profitability ratio calculated by dividing net income by revenue, expressing the percentage of revenue that translates into net income.

Collection Policy

The procedures and guidelines used by a company to manage and collect accounts receivable.