The net realizable value approach mandates that the NRV of the by-products/scrap be treated as
A)an increase in joint costs.
B)a sunk cost.
C)a reduction of joint costs.
D)a cost that can be ignored totally.

Question

Quizplus · Accepted Answer

The net realizable value approach mandates that the NRV of the by-products/scrap be treated as a reduction of joint costs. This is because the NRV is considered a revenue that offsets the joint costs of producing both the main product and the by-products/scrap. Therefore, the joint costs are reduced by the revenue generated from the sale of the by-products/scrap, resulting in a lower overall cost for the production process. Thus, option C is the correct choice.

The Net Realizable Value Approach Mandates That the NRV of the By-Products/scrap