Use the information below to answer the following question(s).Raynor Manufacturing purchases trees from Tree Nursery and processes them up to the splitoff point, where two products (paper and pencil casings)are obtained.The products are then sold to an independent company that markets and distributes them to retail outlets.The following information was collected for the month of October.Trees processed:
50 trees (yield is 30,000 sheets of paper and 30,000 pencil casings and no scrap)
Cost of purchasing 50 trees and processing them up to the splitoff point to yield 30,000 sheets of paper and 30,000 pencil casings is $1,500.Raynor Manufacturing's accounting department reported no beginning inventories; however, ending inventory amounts reflected 1,000 sheets of paper in stock.
-Which method allocates joint costs on the basis of each product's relative sales value at the splitoff point?
A)the constant gross margin percentage NRV method
B)the estimated net realizable value method
C)the physical measure method
D)the sales value at splitoff method
E)the splitoff method

Question

Use the information below to answer the following question(s).Raynor Manufacturing purchases trees from Tree Nursery and processes them up to the splitoff point, where two products (paper and pencil casings)are obtained.The products are then sold to an independent company that markets and distributes them to retail outlets.The following information was collected for the month of October.Trees processed:
50 trees (yield is 30,000 sheets of paper and 30,000 pencil casings and no scrap)
  Cost of purchasing 50 trees and processing them up to the splitoff point to yield 30,000 sheets of paper and 30,000 pencil casings is $1,500.Raynor Manufacturing's accounting department reported no beginning inventories; however, ending inventory amounts reflected 1,000 sheets of paper in stock.
-Which method allocates joint costs on the basis of each product's relative sales value at the splitoff point?
A)the constant gross margin percentage NRV method 
B)the estimated net realizable value method 
C)the physical measure method 
D)the sales value at splitoff method 
E)the splitoff method

Quizplus · Accepted Answer

The sales value at splitoff method allocates joint costs based on the relative sales value of each product at the splitoff point. This method is the most appropriate in situations where the two products have significantly different sales values and cannot be easily measured in physical terms.

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