Question

Butterfly Corp. manufactures products M1 and M2 from a joint process, which also yields a by-product, B1. Butterfly accounts for the revenues from its by-product sales as other income. Additional information follows: M1 M2 B1 Total Units produced 28,200 13,100 9,900 51,200 Allocated joint costs ? ? ? $ 373,000 Sales value at split-off $ 402,000 $ 268,000 $ 93,000 $ 763,000 Required: Assuming that joint product costs are allocated using the net realizable value at split-off approach, what was the joint cost allocated to product M1?

Answer 1

To calculate the joint cost allocated to product M1 using the net realizable value at the split-off approach, you multiply the proportion of M1's net realizable value by the total NRV of all products by the total joint costs, which results in $196,844.03.

Step-by-step explanation:

The student is asking about the allocation of joint product costs using the net realizable value at the split-off approach for a given company named Butterfly Corp. To find the joint cost allocated to product M1, we need to first calculate the net realizable value (NRV) for each product at split-off. These values are obtained by deducting the final sales value for any further processing or selling costs that are incurred after the split-off point. Since there's no mention of additional costs, we will assume that the sales values at split-off are the net realizable values:

• NRV for M1 = $402,000
• NRV for M2 = $268,000
• NRV for B1 = $93,000

Next, we calculate the total net realizable value for all products combined:

Total NRV = NRV for M1 + NRV for M2 + NRV for B1
Total NRV = $402,000 + $268,000 + $93,000 = $763,000

Now, we can allocate the joint cost to M1 based on its proportion of the total NRV:

Allocated joint cost to M1 = (NRV for M1 / Total NRV) × Total joint costs
Allocated joint cost to M1 = ($402,000 / $763,000) × $373,000
Allocated joint cost to M1 = $196,844.03 (rounded to two decimal places)