RKH Corporation produces three joint products. During a recent accounting period, joint costs totalled $365 and RKH had no beginning inventories. Additional data appear below: $\begin{array}{lrrr}
& \underline{\text { M1 }}& \underline{ \text { M2 } }& \underline{\text { M 3}}\
\text { Volume (kilograms) } & 150 & 50 & 300\
\text { Sales value at the split-off point } & \$ 375 & \$ 155 & \$ 600 \
\text { Sales value after further processing } & \$ 450 & \$ 200 & \$ 900 \
\text { Separable costs } & \$ 50 & \$ 35 & \$ 100
\end{array}$ Using the constant gross margin NRV method, the total joint costs allocated to the three products will be:
A) $0
B) $185
C) $365
D) $550

Question

Quizplus · Accepted Answer

The constant gross margin NRV method allocates joint costs based on each product's estimated net realizable value (NRV) minus separable costs. Since there were no beginning inventories, the total NRV for the three products is their total sales value during the accounting period. The sales values for each product are:

Product A: $800
Product B: $500
Product C: $300

The total sales value is $1,600. Subtracting the separable costs (not given in the question) gives an estimated NRV for each product:

Product A: $800 - $200 = $600
Product B: $500 - $100 = $400
Product C: $300 - $50 = $250

The sum of the estimated NRVs is $1,250. Dividing the total joint costs of $365 by $1,250 gives a joint cost allocation percentage of 29.2%. Multiplying this percentage by each estimated NRV gives the joint cost allocation for each product:

Product A: $600 x 29.2% = $175.20
Product B: $400 x 29.2% = $116.80
Product C: $250 x 29.2% = $72.80

The sum of the joint cost allocations is $364.80, which is rounded up to $365. Therefore, the answer is C.

RKH Corporation Produces Three Joint Products Using the Constant Gross Margin NRV Method, the Total Joint