Answer (A) is correct . First, the final sales prices are estimated: Giant: 600 gallons @ $17/gallon = $10,200 Mini: 200 gallons @ $??4/gallon = $?????800 ? From these amounts, separable costs are subtracted: Giant: $10,200 – $1,000 = $9,200 Mini: No separable costs This yields a total net realizable value (NRV) for the entire production run of $10,000 ($9,200 Giant + $800 Mini). The next step is to allocate the total joint costs of $5,000 ($2,000 input cost + $3,000 processing cost) based on the proportion of the total NRV represented by each product: Giant: $5,000 × ($9,200 ÷ $10,000) = $4,600 Mini: $5,000 × ($???800 ÷ $10,000) = $???400 The total cost of producing Giant using the estimated NRV method is therefore $5,600 ($4,600 allocated joint cost + $1,000 separable cost).
Answer (B) is incorrect because The amount of $5,564 is not based on the net realizable value method.
Answer (C) is incorrect because The amount of $5,520 results from allocating the $1,000 of additional cost between Giant and Mini; Mini should not absorb any of the additional processing costs.
Answer (D) is incorrect because The amount of $4,600 is only the allocated joint cost of Giant; it fails to add in the additional $1,000 of separable costs.
|
