Allocating Joint Costs Using the Net Realizable Value Method
A company manufactures three products, LTen, Triol, and Pioze, from a joint process. Each production run costs $12,000. None of the products can be sold at splitoff, but must be processed further. Information on one batch of the three products is as follows:
Product  Gallons  Further Processing Cost per Gallon 
Eventual Market Price per Gallon 


LTen  3,000  $0.60  $2.20  
Triol  3,500  0.90  4.90  
Pioze  2,200  1.60  6.90 
Required:
1. Allocate the joint cost to LTen, Triol, and Pioze using the net realizable value method. Round your allocation percentages to four decimal places and round the allocated costs to the nearest dollar.
Joint Cost  
Grades  Allocation 
LTen  $ 
Triol  
Pioze  
Total  $ 
2. What if it cost $1.90 to process each gallon of Triol beyond the splitoff point? How would that affect the allocation of joint cost to the three products? Round your allocation percentages to four decimal places and round the allocated costs to the nearest dollar.
Joint Cost  
Grades  Allocation 
LTen  $ 
Triol  
Pioze  
Total  $ 
1 ALLOCATION OF JOINT TO PRODUCTS
JOINT COST ALLOCATED =NET RELISABLE VALUE OF PRODUCT/ TOTAL NET RELISABLE VALUE*JOINT COST
NET RELISABLE VALUE =SALE PRICE PROCSSING COST AFTER SPLIT OFF
L TEN
=(3000*2.20) (3000*.60)
= 4800
TRIOL
3500*4.90)3500*.90
=14000
PIOZE
=2200(6.90 1.60)
=11600
TOTAL NET REALIZABLE VALUE =4800+14000+11600
=30400
JOINT COST ALLOCATION RATIO
=NRV OF PRODUCT/TOTAL NRV
LTEN =4800/30400
=.16
TRIOL =14000/304000
=.46
PIOZE =11600/30400
=.38
JOINT CST ALLOCATION
LTEN =.16*12000
=1920
PERCENTAGE =1920/12000*100
2 WHEN TRIOL PROCESSING COST TO 1.90
TRIOL NRV =4.901.90)*3500
10500
TOTAL NRV CHANGED TO
=26900
SO LTEN JOINT COST =4800/2600*12000
=2141
PERCENTA GE =18%
TRIOL =10500/26900*12000
4684
=39%
PIOZE =11600/26900*12000
5174
=43%
=16%
TRIOL =.46*12000 =5500
PERCENTAGE =46%
PIOZE =.38*12000
4560
PERCENTAGE =38
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