Question

2. Suppose the company does process Crummies into the mulch. Use the net-realizable- value method to allocate the joint production cost between the mulch and the Yummies. (Do not round intermediate calculations.) Allocation of Joint Cost Yummies Mulch

Answer 1

Allocation of Joint cost $45,000 $45,000 Yummies Mulch 2 Joint cost allocated based on Estimated Net Realisable value method Yummies Mulch Total Final sales value $72,000 $84,000 $156,000 Less: Additional processing cost $12,000 $12,000 Net realisable value $72,000 $72,000 $144,000 Weightage 50.00% 50.00% 100.00% Joint Cost allocated $45,000 $45,000 $90,000 a Net incremental revenue $3.00 per kilogram Final selling price Selling price at split-off point Net incremental revenue $10.50 $7.500 $3.00 1-b Yes Because there is incremental profit Net incremental revenue Additional processing cost Incremental profit $3.00 per kg $1.50 per kg $1.50 per kg