CAF-5 · Chapter 8 · Question 7 of 10
When applying the Net Realisable Value (NRV) method to allocate joint costs, how is the NRV of a joint product calculated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Final sales value minus any further processing costs and selling expenses.
Explanation
Under the NRV method of joint cost allocation, the hypothetical value of the product at the split-off point is found by taking the ultimate final selling price and working backwards by subtracting the costs required to complete and sell the product (further processing and selling costs).
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