# Apportionment of Joint Cost of Materials

### 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:

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

### Solution

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

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

= 28%

## 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.