Apportionment of Joint Cost of Materials

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 01, 2023

Sometimes, when materials are purchased in bulk at a single rate, there will be a mixture in terms of item quality/grade.

In such cases, it is necessary to determine the proper cost of each quality/grade of the material.

This process of finding the separate cost of each material is called apportionment of the joint cost of materials.

The cost of the various qualities/grades is ascertained based on their selling price or market price, as demonstrated in the following example:

Example 1

A truckload of Material A was purchased for $72,000. The material was sorted into the following grades and market rates:

Grades and Prices For Material A

Required: Calculate the purchase rate per unit of each grade of material, assuming that all grades yield the same rate of profit.


Calculation of Sales Value at Different Grades
Calculation of Profit

Rate of profit on selling price (or sales value) = (Profit / Sales value) x 100

= (28,000 / 1,00,000) x 100

= 28%

Calculation of Cost Price of Material

Example 2

Batala Foundry melts pig iron to produce castings. Coke and limestone are used to melt the metal.

150 kgs. of coke and 50 kgs. of limestone are required to melt 1 ton of pig iron. The loss in melting is 5% and the rejections amount to 10% of the castings made.

The cost of pig iron is $1,790 per ton, the cost of coke is $1,300 per ton, and the cost of limestone is $200 per ton. Rejections fetch a rate of $1.20 per kg.

Required: Calculate the cost of raw materials per kg. of saleable casting.


Calculation of Raw Materials

Apportionment of Joint Cost of Materials FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.