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# Net Realizable Value Method

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J-M Company uses a joint process costing \$15,000 to produce three main products. The company had no beginning inventory. Its current period operation data follow:
Units U Produced Sales val separable sales val aft Units
at split off costs further proc. Sold
S 500 \$5,000 \$500 \$7,000 400
T 450 6,000 650 9,000 300
R 300 9,000 700 10,000 250

In the following questions, compute the allocation of joint costs for each product and then use that information to determine gross profit and ending inventory values for the products. Note that only some of the products are sold and some remain in inventory. (Hint: Once you compute the gross profit, adjust it for the proportion of units sold; once you compute total costs, adjust that for units in ending inventory).

8. If J-M uses the net realizable value method and performs further processing after the split-off point, what is the gross profit for product R?
a. \$4,603
b. \$2,936
c. \$3,224
d. \$3,603

9. If J-M uses the net realizable value method and performs further processing after the split-off point, what is the carrying value of the ending inventory for product S?
a. \$803
b. \$1,134
c. \$907
d. \$1,009

10. If J-M sells products at the split-off point and uses the relative sales value at split-off point method to allocate joint costs, what is the carrying value of ending inventory for product T?
a. \$1,717
b. \$2,575
c. \$2,250
d. \$1,500

#### Solution Preview

J-M Company uses a joint process costing \$15,000 to produce three main products. The company had no beginning inventory. Its current period operation data follow:
Units Sales Value Separable Sales Value After Units
Product Produced at Split-Off Costs Further Processing Sold
S 500 \$5,000 \$500 \$ 7,000 400
T 450 6,000 650 9,000 300
R 300 9,000 700 10,000 250

In the following questions, compute the allocation of joint costs for each product and then use that information to determine gross profit and ending inventory values for the products. Note that only some of the products are sold and some remain in inventory. (Hint: Once you compute the gross profit, adjust it for the proportion of units sold; once you compute total costs, adjust ...

#### Solution Summary

The solution explains how to allocate joint costs under Net Realizable Value Method.

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