Figure 6-4
Deli 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.
-Refer to Figure 6-4. What amount of joint costs will be allocated to product X using the estimated net realizable value method?
A)£13,636
B)£40,000
C)£39,000
D)£11,765

Question

Quizplus · Accepted Answer

The estimated net realizable value method allocates joint costs based on the relative sales value of the products at the split-off point. In this case, the sales value of X is £40,000 (4,000 units x £10.00 per unit) and the sales value of Y is £45,000 (6,000 units x £7.50 per unit). Therefore, the total sales value of the two products is £85,000. The proportion of joint costs allocated to X is £40,000 / £85,000 = 47.06%. Therefore, the amount of joint costs allocated to X is £25,000 x 47.06% = £11,765.

Figure 6-4 Deli Products Produces Two Products, X and Y, in a in a Single