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 gross profit for Brights assuming the net realizable value method is used?

Question

Quizplus · Accepted Answer

Using the net realizable value method, we compare the total separable costs with the total net realizable value for each product. 
For Brights,
Net realizable value = market price - separable costs = $250 - $60 = $190
Total net realizable value = 250 x $190 = $47,500
Total separable costs for Brights = 250 x $60 = $15,000
Gross profit for Brights = Total net realizable value - Total separable costs = $47,500 - $15,446 = $36,054.

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