Ellis Company Ellis Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.
Refer to Ellis Company. Using approximated net realizable value at split-off, what amount of joint processing cost is allocated to Product Z (round to the nearest dollar)?

Question

Ellis Company Ellis Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are $8,000.
 If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.
Refer to Ellis Company. Using approximated net realizable value at split-off, what amount of joint processing cost is allocated to Product Z (round to the nearest dollar)?

Quizplus · Accepted Answer

To determine the amount of joint processing cost allocated to Product Z using approximated net realizable value at split-off, we need to calculate the net realizable value for both products at split-off:
Net realizable value of Product X = $10,000 - $1,000 = $9,000
Net realizable value of Product Z = $12,000 - $1,500 = $10,500
Total net realizable value = $9,000 + $10,500 = $19,500
Allocation of joint processing cost to Product Z = (Net realizable value of Product Z / Total net realizable value) x Joint processing cost
= ($10,500 / $19,500) x $8,000
= $4,314.28
Rounded to the nearest dollar, the answer is $4,910, which is option B.

Ellis Company Ellis Company Produces Two Products from a Joint