llocating Joint Costs Using the Net Realizable Value Method A company manufactur
ID: 2342514 • Letter: L
Question
llocating Joint Costs Using the Net Realizable Value Method
A company manufactures three products, L-Ten, Triol, and Pioze, from a joint process. Each production run costs $12,300. None of the products can be sold at split-off, but must be processed further. Information on one batch of the three products is as follows:
Required:
1. Allocate the joint cost to L-Ten, Triol, and Pioze using the net realizable value method. Round your allocation percentages to four decimal places and round the allocated costs to the nearest dollar.
2. What if it cost $2.10 to process each gallon of Triol beyond the split-off point? How would that affect the allocation of joint cost to the three products? Round your allocation percentages to four decimal places and round the allocated costs to the nearest dollar.
Product Gallons Further ProcessingCost per Gallon Eventual Market
Price per Gallon L-Ten 3,200 $0.70 $2.10 Triol 3,700 1.10 5.40 Pioze 2,000 1.50 6.20
Explanation / Answer
Net realizable value = Sale value - Additional processing cost
Percentage of joint costs to be allocated to L-Ten = $4,480 / $29,790 = 15.0386%
Percentage of joint costs to be allocated to Triol = $15,910 / $29,790 = 53.4072%
Percentage of joint costs to be allocated to Pioze = $9,400 / $29,790 = 31.5542%
2.
Net realizable value = Sale value - Additional processing cost
Percentage of joint costs to be allocated to L-Ten = 0%
Percentage of joint costs to be allocated to Triol = $12,210 / $20,410 = 59.8236%
Percentage of joint costs to be allocated to Pioze = $8,200 / $20,410 = 40.1764%
Product Sale value Additional processing cost Net realizable value L-Ten $6,720 (3,200*$2.10) $2,240 (3,200*$0.70) $4,480 Triol $19,980 (3,700*$5.40) $4,070 (3,700*$1.10) $15,910 Pioze $12,400 (2,000*$6.20) $3,000 (2,000*$1.50) $9,400 $29,790Related Questions
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