US CMA Part 1 · Chapter 4 · Question 8 of 22
Under the commonly used net realizable value approach to by-products, how is the NRV of a by-product recognized at the time of production?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) It is deducted from the joint costs before those costs are allocated to the main products
Explanation
By-products have relatively low sales value. Under the production (NRV) method, the by-product's net realizable value is recorded as inventory and subtracted from joint production costs, so only the remaining joint cost is allocated to the main products.
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