CAF-5 · Chapter 8 · Question 3 of 10
When a by-product is generated in a joint process and it has a measurable net realizable value (NRV), what is the most common accounting treatment for this NRV?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) It is deducted from the total joint manufacturing costs before those costs are allocated to the main joint products.
Explanation
The standard accounting treatment for a by-product with a measurable sales value is to deduct its Net Realisable Value (NRV) from the total joint costs of the process. The remaining net joint costs are then allocated to the main joint products.
More Joint and By-Product Costing MCQs
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- Q7When applying the Net Realisable Value (NRV) method to allocate joint costs, how is the NRV of a joint product calculated?
- Q8Product X is a joint product that can be sold at the split-off point for Rs. 50 per unit. Alternatively, it can be processed further at an…
- Q9A process produces three joint products. Product M has a sales value at the split-off point of Rs. 400,000, Product N has a sales value of…