| Posted: 01 Jun 2010 at 19:36 | IP Logged
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The following is the explanation given by Wiley..I do not understand how to get the sales value at split off and the calculation of the NRV of the byproduct .If anyone could help me or present the answer in a better way, I would really appreciate it, thanks.
Net realizable value (NRV) is the predicted selling price in the ordinary course of business less reasonably predictable costs of completion and disposal. The joint cost of $54,000 is reduced by the NRV of the by-product ($4,000) to get the allocable joint cost ($50,000). The computation is
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Sales value at split-off |
Weighting |
Joint costs allocated |
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Kul |
$40,000 |
$40,000/$75,000 x $50,000 |
$26,667 |
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Wu |
35,000 |
$35,000/$75,000 x $50,000 |
23,333 |
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$75,000 |
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$50,000 |
Therefore, $26,667 of the joint cost should be allocated to product Kul.
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Topic: NRV !
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