Figure 6-5
Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs £50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of £60 per unit and £40 per unit for Dulls. The market price is £250 for Brights and £200 for Dulls.
-Refer to Figure 6-5. What is the amount of joint costs allocated to Brights using the net realizable value method?

Question

Quizplus · Accepted Answer

To allocate joint costs using the net realizable value method, we need to calculate the total revenue for each product by multiplying the units produced with their market price.

Total revenue for Brights = 250 x £250 = £62,500 
Total revenue for Dulls = 1000 x £200 = £200,000

Total revenue for both products = £62,500 + £200,000 = £262,500

Next, we allocate joint costs to each product based on their proportionate share of total revenue.

Allocated joint costs for Brights = (£62,500 / £262,500) x £50,000 = £11,446

Therefore, the correct answer is D.

Figure 6-5 Eden Company Manufactures Two Products, Brights and Dulls, from a from a Joint