Costs incurred beyond the split-off point that are assignable to one or more ind
ID: 2475282 • Letter: C
Question
Costs incurred beyond the split-off point that are assignable to one or more individual products. 6 Product that is one of two or more products with relatively high sales value but not separately identifiable until the split-off point. Required Match each term with its appropriate definition. Estimated net realisable value method. Miljo-Sape AS produces two joint products, cooking oil and soap oil, from a single vegetable oil refining process. In July 2011, the joint costs of this process were NOK 24 000 000. Separable processing costs beyond the split-off point were cooking oil, NOK 30 000 000; and soap oil, NOK 7500 000. Cooking oil sells for NOK 50 per drum. Soap oil sells for NOK 25 per drum. Miljo-Sape produced and sold 1 000 000 drums of cooking oil and 500 000 drums of soap oil. There are no beginning or ending stocks of cooking oil or soap oil. Required Allocate the NOK 240 000 00 joint costs using the estimated NRV method. INTERMEDIATE LEVEL Joint-cost allocation, insurance settlement. Galinha-Ksquina SA grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2011 is as follows:Explanation / Answer
NRV method is the net realizable method. Under this method, joint costs are allocated on the basis of final sales value - the separable costs.
cooking oil: sales = number of drums*price per drum = 1,000,000*NOK 50 = NOK 50,000,000.
separable costs = NOK 30,000,000. NRV = sales value - separable costs = NOK 50,000,000 - NOK 30,000,000 = NOK 20,000,000.
soap oils: sales = number of drums*price per drum = 500,000*NOK 25 = NOK 12,500,000
separable costs = NOK 7,500,000. NRV = sales value - separable costs = NOK 12,500,000 - NOK 7,500,000 = NOK 5,000,000.
percentage for cooking oil = its NRV/total NRV = 20,000,000/(20,000,000+5,000,000) = 80%
percentage for soap oil = its NRV/total NRV = 5,000,000/(20,000,000+5,000,000) = 20%
Total joint costs = NOK 24,000,000
allocation for cooking oil = 80% of 24,000,000 = NOK 19,200,000
allocation for soap oil = 20% of 24,000,000 = NOK 4,800,000