Question

Marin Products produces three products — DBB-1, DBB-2, and DBB-3 from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Key information about Marin's production, sales, and costs follows.

	DBB-1			DBB-2			DBB-3			Total
Units Sold		14,000			23,000			30,000			67,000
Price (after addt’l processing)	$	75		$	60		$	85
Separable Processing cost	$	483,000		$	198,000		$	287,000		$	968,000
Units Produced		14,000			23,000			30,000			67,000
Total Joint Cost										$	4,100,000
Sales Price at Split-off	$	15		$	20		$	40

The amount of joint costs allocated to product DBB-3 using the net realizable value method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

Multiple Choice

• $2,312,810.

• $349,080.

• $1,207,860.

• $856,900.

• $579,330.

Answer 1

Answer =  $2312810

Calculated as

Calculation of Net realizable value
		DBB-1	DBB-2	DBB-3	Total
a	Units Sold	14,000	23,000	30,000	67,000
b	Price (after addt’l processing)	75	60	85
c=a*b	Total Sale	1050000	1380000	2550000	4,980,000
d	Separable Processing cost	483,000	198,000	287,000	968,000
e = c-d	Net Realizable value	567,000	1,182,000	2,263,000	4,012,000
	Total Joint Cost	4100000
	Net Realizable value of DDB-3	2,263,000
	Total Realizable value of all products	4,012,000
	Calculation of Ration of Joint cost allocated to DDB-3	=	2,263,000	x	100
			4,012,000
		=	56.41	%
	So Joint Cost allocated to DDB-3	=	=56.41%*4100000
			$             2,312,810

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