Products X,Y,and Z are produced from the same process at a cost of $5,200.Five thousand pounds of raw material yields 1,500 X,2,500 Y,and 1,000 Z.Selling prices are: X $2 per unit,Y $4 per unit,Z valueless.The ending inventory of X is 50 units.What is the value of the ending inventory if joint costs are allocated using net realizable value?
A) $21.67.
B) $31.20.
C) $40.00.
D) $42.00.

Question

Quizplus · Accepted Answer

The net realizable value method allocates joint costs based on the proportion of the total sales value of each product. X's sales value is $3,000 (1,500 units * $2), Y's is $10,000 (2,500 units * $4), and Z's is $0. The total sales value is $13,000. X's proportion is $3,000/$13,000. The joint cost allocated to X is $1,200 ($5,200 * $3,000/$13,000). The cost per unit of X is $0.80 ($1,200/1,500 units). The ending inventory of 50 units is valued at $40.00 (50 units * $0.80).

Products X,Y,and Z Are Produced from the Same Process at a Cost