Brite Surface Company Brite Surface Company produces four floor cleaners from the same process: C, D, E, and G. Joint product costs are $9,000. (Round all answers to the nearest dollar.)
If Brite Surface sells the products after further processing, the following disposal costs will be incurred: C, $2.50; D, $1.00; E, $3.50; G, $6.00.
Refer to Brite Surface Company. Using net realizable value at split-off, what amount of joint processing cost is allocated to Product C?

Question

Brite Surface Company Brite Surface Company produces four floor cleaners from the same process: C, D, E, and G. Joint product costs are $9,000. (Round all answers to the nearest dollar.)
 If Brite Surface sells the products after further processing, the following disposal costs will be incurred: C, $2.50; D, $1.00; E, $3.50; G, $6.00.
Refer to Brite Surface Company. Using net realizable value at split-off, what amount of joint processing cost is allocated to Product C?

Quizplus · Accepted Answer

Net realizable value at split-off for each product can be calculated as follows:
Product C: $3.50 - $2.50 = $1.00
Product D: $0.00 (it is not profitable to sell)
Product E: $7.00 - $3.50 = $3.50
Product G: $10.00 - $6.00 = $4.00

Total net realizable value is $8.50.

The allocation of joint processing cost to each product will be based on their relative net realizable values.

Product C's relative net realizable value = $1.00/$8.50 = 0.1176

Therefore, the amount of joint processing cost allocated to Product C will be $9,000 x 0.1176 = $1,058.80, which rounds to $1,017.

Thus, B is the correct answer.

Brite Surface Company Brite Surface Company Produces Four Floor Cleaners