Question

17. Scotland Beauty Products manufactures face cream, body lotion, and liquid soap in a joint manufacturing process. At the split-off point, the company has 300 pounds of face cream with a market value of $15 per pound, 200 pounds of body lotion with a market value of $13 per pound, and 300 pounds of liquid soap with a market value of $7 per pound and has incurred $200,000 in joint costs. The net realizable value (NRV) of the face cream is $7,500, the NRV of the body lotion is $3,500, and the NRV of the liquid soap is $4,000.

Using the net realizable value method, allocate the joint costs to (a) face cream, (b) body lotion, and (c) liquid soap. Round percentages in intermediate steps to the nearest whole percentage.

Answer 1

	Face Cream	Body Lotion	Liquid Soap	Total
Net realizable value (NRV)	$             7,500	$          3,500	$          4,000	$           15,000
Percent of total NRV	50%	23%	27%	100%
Allocation of joint costs $	$       100,000	$        46,000	$       54,000	$       200,000