Question

Joint Cost Allocation-Net Realizable Value Method Lily's Lemonade Stand makes three types of lemonade: pure, raspberry, and strawberry. The lemonade is produced through a joint mixing process that costs a total of $30 per batch. One batch produces 32 cups of pure lemonade, 21 cups of strawberry lemonade, and 21 cups of raspberry lemonade. After the split-off point, all three lemonades can be sold for $0.80 per cup, but strawberry and raspberry lemonade can be processed further by adding artificial coloring and flavoring and sold for $0.95 and $1.00 per cup, respectively. It is estimated that these additional processing costs are $0.75 and $1.80 per batch for strawberry and raspberry lemonade, respectively. Allocate the joint costs of production to each product using the net realizable value method Joint Product Allocation Pure lemonade $ 13.42 x Strawberry lemonade 13.42 Raspberry lemonade 13.42 x Totals Feedback Check My Work

Answer 1

	Calculation of net realizable value Per batch
		Pure Lemonde	Strawberry Lemonade	Respberry Lemonade	Total
a	Sales Price per cup	$                   0.80	$                                   0.95	$                                 1.00
b	Number of cups	32	21	21
c	Sale Value Per Batch (a*b)	$                25.60	$                                 19.95	$                               21.00	$    66.55
d	Further processing cost per batch	0	0.75	1.8	$       2.55
e	Net Realizable Value (c-d)	$                25.60	$                                 19.20	$                               19.20	$    64.00

Allocation of joint cost
Pure Lemonde	=$30/64 *25.60	$                12.00
Strawberry Lemonade	=$30/64 *19.20	$                   9.00
Respberry Lemonade	=$30/64 *19.20	$                   9.00
Total		$                30.00