Answer the following question(s)using the information below:
The Morton Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result.The following information was collected for the month of October: The costs of purchasing the 65,000 litres of unprocessed goat milk and processing it up to the splitoff point to yield a total of 58,500 litres of salable product was $72,240.There were no inventory balances of either product.Condensed goat milk may be processed further to yield 19,500 litres (the remainder is shrinkage)of a medicinal milk product, Xyla, for an additional processing cost of $3 per usable litre.Xyla can be sold for $18 per litre.Skim goat milk can be processed further to yield 28,100 litres of skim goat ice cream, for an additional processing cost per usable litre of $2.50.The product can be sold for $9 per litre.There are no beginning and ending inventory balances.
-Which method of allocating costs would be used if the selling prices of all products at the splitoff point are unavailable?
A)sales value at splitoff method
B)NRV method
C)physical measures method
D)net margin method
E)reciprocal method

Question

Answer the following question(s)using the information below:
The Morton Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result.The following information was collected for the month of October:   The costs of purchasing the 65,000 litres of unprocessed goat milk and processing it up to the splitoff point to yield a total of 58,500 litres of salable product was $72,240.There were no inventory balances of either product.Condensed goat milk may be processed further to yield 19,500 litres (the remainder is shrinkage)of a medicinal milk product, Xyla, for an additional processing cost of $3 per usable litre.Xyla can be sold for $18 per litre.Skim goat milk can be processed further to yield 28,100 litres of skim goat ice cream, for an additional processing cost per usable litre of $2.50.The product can be sold for $9 per litre.There are no beginning and ending inventory balances.
-Which method of allocating costs would be used if the selling prices of all products at the splitoff point are unavailable?
A)sales value at splitoff method 
B)NRV method 
C)physical measures method 
D)net margin method 
E)reciprocal method

Quizplus · Accepted Answer

The NRV method would be the best choice if the selling prices of all products at the splitoff point are unavailable. This is because the NRV method uses the estimated final selling prices of the products to allocate joint costs, which includes the cost of processing up to the splitoff point. The estimated final selling prices can be used to calculate the net realizable value (NRV) of each product, which is then used to allocate joint costs based on their relative proportion to the total NRV of all products. In this case, the estimated selling prices for Xyla and skim goat ice cream are given, so the NRV method can be used to allocate joint costs between the two products at the splitoff point.

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