Sky airlines produces two different aircrafts. The joint process incurs costs of $10 million. Both aircrafts can be sold at split-off or processed further to increase the final sales value. The following information is related to the two products. (all costs are recorded in millions) If the sales price at split-off provided is not reliable, but the final sales value and further processing costs are reliable, what is the joint costs allocated to B752 using the appropriate method of allocation?
A)$4.26 million.
B)$4.50 million.
C)$4.67 million.
D)$5 million.

Question

Sky airlines produces two different aircrafts. The joint process incurs costs of $10 million. Both aircrafts can be sold at split-off or processed further to increase the final sales value. The following information is related to the two products. (all costs are recorded in millions)  If the sales price at split-off provided is not reliable, but the final sales value and further processing costs are reliable, what is the joint costs allocated to B752 using the appropriate method of allocation?
A)$4.26 million. 
B)$4.50 million. 
C)$4.67 million. 
D)$5 million.

Quizplus · Accepted Answer

($420 - $200) + ($480 - $260) = $440 
($420 - $200) ÷ $440 x $10 = $5 
(B752 final sales- B752 further processing cost) + (B797 final sales- B797 further processing cost) = total NRV 
(B752 final sales- B752 further processing cost) ÷ total NRV x joint process costs

Sky Airlines Produces Two Different Aircrafts