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Products X, Y, and Z are produced from the same process at a cost of $7,500....

Products X, Y, and Z are produced from the same process at a cost of $7,500. Five thousand pounds of raw material yields 3,500 X, 4,500 Y, and 3,000 Z. Selling prices are: X $2 per unit, Y $4 per unit, and Z valueless. The ending inventory of X is 90 units. What is the value of the ending inventory if joint costs are allocated using net realizable value?

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Answer #1

Ending Inventory of Product X = 90 units

Split-off point cost = $7,500

Joint costs allocated to Product X, using Net realizable value

[(3,500 * $2) / [(3,500 * $2) + ($4,500 * $4)] * $7,500

= $2,100

Cost of ending inventory = ($2,100 / 3,500) * 90

Cost of ending inventory = $54

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