Question

Marin Products produces three products — DBB-1, DBB-2, and DBB-3 from a joint process. Each product...

Marin Products produces three products — DBB-1, DBB-2, and DBB-3 from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Key information about Marin's production, sales, and costs follows.

DBB-1 DBB-2 DBB-3 Total
Units Sold 14,000 23,000 30,000 67,000
Price (after addt’l processing) $ 75 $ 60 $ 85
Separable Processing cost $ 483,000 $ 198,000 $ 287,000 $ 968,000
Units Produced 14,000 23,000 30,000 67,000
Total Joint Cost $ 4,100,000
Sales Price at Split-off $ 15 $ 20 $ 40

The amount of joint costs allocated to product DBB-3 using the net realizable value method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

Multiple Choice

  • $2,312,810.

  • $349,080.

  • $1,207,860.

  • $856,900.

  • $579,330.

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Answer #1

Answer =  $2312810

Calculated as

Calculation of Net realizable value
DBB-1 DBB-2 DBB-3 Total
a Units Sold 14,000 23,000 30,000 67,000
b Price (after addt’l processing) 75 60 85
c=a*b Total Sale 1050000 1380000 2550000 4,980,000
d Separable Processing cost 483,000 198,000 287,000 968,000
e = c-d Net Realizable value 567,000 1,182,000 2,263,000 4,012,000
Total Joint Cost 4100000
Net Realizable value of DDB-3 2,263,000
Total Realizable value of all products 4,012,000
Calculation of Ration of Joint cost allocated to DDB-3 = 2,263,000 x 100
4,012,000
= 56.41 %
So Joint Cost allocated to DDB-3 = =56.41%*4100000
$             2,312,810

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