This is the answer if the allocation were done based on selling price, not NRV. This is the amount that would be allocated if the joint costs were allocated equally to the three products. The NRV of an item is calculated as the selling price minus the costs to complete and dispose. In order to allocate joint costs based on NRV, we need to calculate the total NRV that all of the joint products have at the split off point. We will make these calculations based on one ton of raw materials. We can do this because the answer is in %, not in the dollar amount. F1 has an NRV of $2 per unit and there are 5 units, so this is $10 of NRV. F2 has an NRV of $5 per unit and there are 2 units, so this is $10 of NRV. F3 has an NRV of $10 per unit and there are three units, so this is $30 of NRV. In total there is $50 of NRV and the NRV of F1 is 20% of this amount. This is the amount that would be allocated to F1 if physical units were used to allocate the joint costs.
|