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: M1 M2 M3
Volume (kilograms)150 50 300
Sales value at the split-off point $375 $155 $600
Sales value after further processing $450 $200 $900
Separable costs $50 $35 $100
Using the constant gross margin NRV method, the joint costs allocated to M1 will be:
A)$290
B)$160
C)$110
D)$50

Question

Quizplus · Accepted Answer

The constant gross margin NRV method allocates joint costs based on the net realizable value (NRV) of each product. First, calculate the NRV for each product (Sales value after further processing - Separable costs). Then, determine the total NRV and the gross margin percentage. Finally, allocate the joint costs to M1 based on its NRV proportion.

RKH Corporation Produces Three Joint Products