US CMA Part 1 · Chapter 4 · Question 6 of 22
Joint costs of $300,000 produce two products that must be processed further before sale: Product R: 10,000 units, final selling price $45, separable processing costs $90,000 Product S: 20,000 units, final selling price $18, separable processing costs $60,000 Using the net realizable value method, how much joint cost is allocated to Product R (to the nearest dollar)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $163,636
Explanation
NRV of R = 10,000 x $45 - $90,000 = $360,000. NRV of S = 20,000 x $18 - $60,000 = $300,000. Total NRV = $660,000. Allocation to R = $300,000 x $360,000 / $660,000 = $163,636 (rounded). Using final sales values without deducting separable costs would give $166,667.
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