HGT Corporation Produces Four Products from a Common Production Process

HGT Corporation produces four products from a common production process. Selected data from HGT's accounting system for the four products appears below: Sofa Standard Floor Full-Body
Cushions Pillows Cushions Pillows
Quantity 100 150 50 200
Price per unit at split-off $10 $12 $18 $15
Price per unit after further processing $13 $15 $20 $18
Separable costs $100 $150 $150 $200
Joint costs for the accounting period totalled $5,000. Each product line has a different product manager who is evaluated based on product line profitability. Therefore each manager is motivated to reduce his / her total product line costs as much as possible. The managers have been given information about potential joint cost allocations using the following three methods: physical output, sales at split-off point, and net realizable value. The managers are comparing the joint cost allocations under each method so that they can give the accountant input about their preferred method(s) .
If HGT allocates joint costs using net realizable value method, the total joint cost allocated to floor cushions will be:

A) $570
B) $720
C) $420
D) $563