Question

The net realizable value method ________.

A) allocates joint costs to joint products on the basis of a comparable physical measure at the split off point
B) allocates joint costs to joint products on the basis of the relative sales value at the split off point
C) allocates joint costs to joint products in a way that each product has an identical gross-margin percentage
D) allocates joint costs to joint products on the basis of relative NRV

Answer 1

B

Explanation:

The NRV is a method in sales, the combination of final sales values and less separable cost value. In sales what we thinking most is about our profit. This concept is usually used by a businessman and salesmen to sell their products. But if we discuss the realizable value of the sales price is less separable cost, it does not provide an equal profit.

For example, if you are selling a branded purse and a daily model purse so the separable cost of the branded purse is different from a normal purse.