Cornerstone Exercise 7.10 Allocating Joint Costs Using the Net Realizable Value
ID: 2492684 • Letter: C
Question
Cornerstone Exercise 7.10
Allocating 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 $12,900. 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 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.
Joint Cost Grades Allocation L-Ten $ Triol Pioze Total $Explanation / Answer
1) Product Gallons Market Price Sale Further Processing Total further Net Realiazable Value cost per unit processing cost Value A B C = A x B D E = A x D F = C- E L Ten 3500.00 2.00 7000.00 0.50 1750 5250.00 Triol 4000.00 5.00 20000.00 1.00 4000 16000.00 Pioze 2500.00 6.00 15000.00 1.50 3750 11250.00 Allocation of Joint cost is on basis of Net realisable value Product Net Realiazable % to total Allocation of value realizable value Joint cost L Ten 5250 16.1538% 2084 Triol 16000 49.2308% 6351 Pioze 11250 34.6154% 4465 Total 32500 100.0000% 12900 Joint cost has been allocated on basis of % of realizable values