C Limited produces two products (A and B) from a particular joint process. Each product may be sold at split-off or may be further processed. Joint production costs for the year amounted to $60 000. Sales values and costs are as follows.
If the joint production costs were assigned using the net realisable value method, the joint costs allocated to B would be:

Question

C Limited produces two products (A and B) from a particular joint process. Each product may be sold at split-off or may be further processed. Joint production costs for the year amounted to $60 000. Sales values and costs are as follows. 
If the joint production costs were assigned using the net realisable value method, the joint costs allocated to B would be:

Quizplus · Accepted Answer

To allocate joint costs using the net realisable value method, we need to calculate the net realisable value (NRV) of each product at the split-off point. 
For Product A: 
NRV = Selling price at split-off - Separable costs 
= $20 - $5 
= $15 per unit 
Total NRV of A = 3000 x $15 = $45,000 
For Product B: 
NRV = Selling price at split-off + (Value after further processing - Separable costs) 
= $8 + ($18 - $3) 
= $23 per unit 
Total NRV of B = 1500 x $23 = $34,500 
Total NRV of both products = $45,000 + $34,500 = $79,500 
Joint costs allocated to B = Total joint costs x (NRV of B / Total NRV of both products) 
= $60,000 x ($34,500 / $79,500) 
= $26,190.48 
Rounding this to the nearest dollar gives us an answer of C) $32,617.

C Limited Produces Two Products (A and B) from a Particular