Laredo Manufactures Nuts and Bolts from a Joint Process (Cost

question 80

Multiple Choice

Laredo manufactures Nuts and Bolts from a joint process (cost = $80,000) . Five thousand pounds of Nuts can be sold at split-off for $20 per pound; ten thousand pounds of Bolts can be sold at split-off for $15 per pound. For product costing purposes Laredo allocates joint costs using the relative sales value method.
The amount of joint cost allocated to Nuts and Bolts, respectively, would be:

• A) $32,000 and $40,000.
• B) $32,000 and $48,000.
• C) $48,000 and $32,000.
• D) $40,000 and $32,000.
• E) $40,000 and $40,000.

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Definitions:

Theory of Constraints

A methodology that focuses on identifying and managing the most significant limiting factor (constraint) that stands in the way of achieving a goal.

Recognizing Constraints

The process of identifying and acknowledging the limitations or restrictions that impact the efficiency and effectiveness of a system, project, or process.

Managing Constraints

The methodical process of identifying, analyzing, and addressing limitations that hinder achieving objectives in operations or projects.

Break Even

The point at which total revenues equal total costs, resulting in neither profit nor loss.