Algonquin Products produces two products, X and Y, in a single process. In 2011, the joint costs of this process were $25,000. In addition, 4,000 units of X and 6,000 units of Y were produced. Separable processing costs beyond the split-off point were X-$10,000; Y-$20,000. X sells for $10.00 per unit; Y sells for $7.50 per unit.
What is the gross profit of product Y assuming the net realizable value method is used?
A)$45,000
B)$16,364
C)$13,636
D)$30,000

Question

Quizplus · Accepted Answer

The net realizable value (NRV) method allocates joint costs based on the final sales value minus separable costs. For product Y: Sales value = 6,000 units * $7.50 = $45,000. Separable costs = $20,000. NRV = $45,000 - $20,000 = $25,000. Total NRV for both products = $25,000 (Y) + $30,000 (X) = $55,000. Joint cost allocation for Y = ($25,000 / $55,000) * $25,000 = $11,364. Gross profit for Y = Sales value - Joint cost allocation - Separable costs = $45,000 - $11,364 - $20,000 = $13,636.

Algonquin Products Produces Two Products, X and Y, in a Single