Figure 7-7 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.
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Refer to Figure 7-7.What is the amount of joint costs allocated to Brights using the net realizable value method?

Question

Quizplus · Accepted Answer

The net realizable value (NRV) method allocates joint costs based on the proportion of NRV of each product. NRV for Brights = (250 units * $250) - (250 units * $60) = $47,500. NRV for Dulls = (1,000 units * $200) - (1,000 units * $40) = $160,000. Total NRV = $47,500 + $160,000 = $207,500. Proportion for Brights = $47,500 / $207,500. Joint costs allocated to Brights = $50,000 * ($47,500 / $207,500) = $11,446.

Figure 7-7 Eden Company Manufactures Two Products, Brights and Dulls