5. Green Needs Inc. is a vegetable processor that purchases vegetables from loca

Question

5. Green Needs Inc. is a vegetable processor that purchases vegetables from local farmers The majority of its processing capacity is devoted to broccoli. A typical month of processing consists of buying 10,000 kilograms of broccoli at a cost of $0.55 per kilogram The broccoli then goes through the following processes Cutting Sorting Cleaning Total $ 7,000 2,500 14,000 23.500 Product yields and average selling price per kilogram are as follows Selling Additional Yield (Tetra price per Kilograms Selling price processingPaks) Tetra Pak Fresh broccoli $2.85 $2.10 crowns Frozen broccoli Grade B broccoli 6,000 2,500 1,000 9,500 $5,500 3,000 $4.80 500 kg of the purchased product is waste and cannot be sold Grade B broccoli is made into broccoli soup and sold in Tetra Paks. The cost of this additional processing is $5,500 and each package can be sold for $4.80 Using the net realizable method, how much of the joint costs should be allocated to the broccoli soup? a) $6,693 b) $8,259 c) $9,208 d) $11,36:3

Explanation / Answer

Calculation of net realisable value Fresh broccoli crowns Frozen broccoli Grade B broccoli Total NRV Quantity   6000 kgs 2500 kgs 3000 paks x Selling price per kg or Pak $2.85 $2.10 $4.80 Net Realisable Value $17,100.00 $5,250.00 $14,400.00 $36,750.00 Total Joint Cost = $23,500 Joint cost allocated to broccoli soup based on NRV = (Total Joint cost / Total NRV) * NRV of Grade B broccoli Joint cost allocated to broccoli soup based on NRV = ($23500/$36750) * $14400 = $9,208 The answer is option c.

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