Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 37

Net Realizable Value Method with By-Products i

Grand Company manufactures products Alpha and Beta from a joint process, which also yields a by-product, Gamma. Grand accounts for the revenues from its by-product sales as other income. Additional information follows:

	Alpha	Beta	Gamma	Total
Units produced	45,000	27,000	18,000	90,000
Allocated joint costs	?	?	?	$280,800
Sales value at split-off	$300,000	$240,000	$60,000	$600,000

Required

Assuming that joint product costs are allocated using the net realizable value at split-off approach, what was the joint cost allocated to product Beta?

Step 1 of 3

Net realizable value method

Net realizable value is calculated as sales revenue less separable processing costs. Under this method, the joint costs are allocated to each of the product based on proportion of net realizable value of each product.