Answer (B) is correct . The NRV at split-off for each of the joint products must be determined. Given that Alfa has a $4 selling price and an additional $2 of processing costs, the value at the split-off is $2 per pound. The total value at split-off for 10,000?pounds is $20,000. Betters has a $10 selling price and an additional $2 of processing costs. Thus, the value at split-off is $8 per pound. The total value of 5,000 pounds of Betters is therefore $40,000. The 1,000 pounds of Morefeed has a split-off value of $3 per pound, or $3,000. Assuming that Morefeed (a by-product) is inventoried (recognized in the accounts when produced) and treated as a reduction of joint costs, the allocable joint cost is $90,000 ($93,000 – $3,000). (NOTE:? Several other methods of accounting for by-products are possible.)? The total net realizable value of the main products is $60,000 ($20,000 Alfa + $40,000 Betters). The allocation to Alfa is $30,000 [($20,000 ÷ $60,000) × $90,000].
Answer (A) is incorrect because The amount of $3,000 is the value of the by-product.
Answer (C) is incorrect because The amount of $31,000 fails to adjust the joint processing cost for the value of the by-product.
Answer (D) is incorrect because The amount of $60,000 is the amount allocated to Betters.
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Assuming Atlas Foods inventories Morefeed, the by-product, the joint cost to be allocated to Alfa using the net realizable value method is
