. Motorsports Inc. produces joint products, Indy and Daytona, each of which incu

Question

. Motorsports Inc. produces joint products, Indy and Daytona, each of which incurs separable production costs after the splitoff point. Information concerning a batch produced at a $300,000 joint cost is presented below:

            Product                      Separable costs                   Sales Value

            Indy                            $30,000                                  $240,000

            Daytona                     $50,000                                  $190,000

What is the joint cost assigned to Indy if costs are assigned using Net Realizable Value (NRV)?

Explanation / Answer

Net realizable vlaue=sales-seperable costs
for indy=240000-30000=210000
for daytona=190000-50000=140000
% allocation for indy=(210000/(210000+140000))*300000
=180000

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