ExpertMedium2 marksMultiple Choice
ACCA · Question 17 · Cost accounting techniques
A chemical processing facility produces two joint products, Alpha and Beta, from a single process. Joint costs are $100,000.
Alpha produces 5,000 liters, selling for $10/liter after further processing costs of $2/liter.
Beta produces 10,000 liters, selling for $6/liter after further processing costs of $1/liter.
Using the Net Realizable Value (NRV) method, how much joint cost is apportioned to Alpha?
A chemical processing facility produces two joint products, Alpha and Beta, from a single process. Joint costs are $100,000.
Alpha produces 5,000 liters, selling for $10/liter after further processing costs of $2/liter.
Beta produces 10,000 liters, selling for $6/liter after further processing costs of $1/liter.
Using the Net Realizable Value (NRV) method, how much joint cost is apportioned to Alpha?
Answer options:
A.
$33,333
B.
$44,444
C.
$50,000
D.
$55,556
How to approach this question
Calculate NRV for each product: Volume * (Selling Price - Further Processing Cost). Then apportion the $100,000 joint cost based on the ratio of each product's NRV to the total NRV.
Full Answer
B.$44,444✓ Correct
Alpha NRV = 5,000 * ($10 - $2) = $40,000.
Beta NRV = 10,000 * ($6 - $1) = $50,000.
Total NRV = $90,000.
Alpha's share = ($40,000 / $90,000) * $100,000 = $44,444.
Common mistakes
Using final sales value without deducting further processing costs.
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