Marin Products produces three products — DBB-1, DBB-2, and DBB-3 from a joint pr
ID: 2413382 • Letter: M
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 16,000 24,000 36,000 76,000 Price (after addt’l processing) $65 $50 $75 Separable Processing cost $110,000 $44,000 $66,000 $220,000 Units Produced 16,000 24,000 36,000 76,000 Total Joint Cost $3,600,000 Sales Price at Split-off $25 $35 $55 The amount of joint costs allocated to product DBB-2 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):
Explanation / Answer
Net Realizable Value Method
Product: DBB-1 DBB-2 DBB-3 Total
Units Sold......................................................... 16,000 24,000 36,000 $76000
Unit price after additional processing($).... ×???? $65 ×???? $50 ×???$75
Total revenue................................................... $1,040,000 $1,200,000 $2,700,000 $4,940,000
Less:?Further processing costs................... ?? 110,000 ?? 44,000 ?66,000 $ 220,000
Net realizable value....................................... $? 930,000 $? 1,156,000 $2,634,000 $4,720,000
Allocation(NRV per product/TotalNRV)*100 19.70% 24.49% 55.81%
Joint cost allocated?(% × $3,600,000)*...... $709,200.00 $881,640.00 $2,009,160.00 $3,600,000
Answer : Joint cost allocated(NRV method) to product DBB-2 is : $881,640.00 (rounded off)
*Differences due to rounding
Working Note:
Joint Cost Allocated = Allocation % multiplied by Total Joint cost
Product: DBB-1 DBB-2 DBB-3
Joint Cost allocated 3,600,000*19.70% 3,600,000*24.49% 3,600,000*55.81%
$709,200.00 $881,640.00 $2,009,160.00
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