Question

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		15,000			24,000			32,000			71,000
Price (after addt’l processing)	$	70		$	65		$	90
Separable Processing cost	$	441,000		$	180,000		$	263,000		$	884,000
Units Produced		15,000			24,000			32,000			71,000
Total Joint Cost										$	4,400,000
Sales Price at Split-off	$	25		$	35		$	55

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):

Answer 1

Under Net realizable value (NRV) method, joint cost is allocated to products using the following formula:
Cost allocated to Joint Product = [NRV of the product / NRV of the total Production] x Total Joint Cost
Calculation of NRV of all products
	DBB-1	DBB-2	DBB-3	Total
Price per unit (after additional processing)	$70.00	$65.00	$90.00
x Units produced	15000	24000	32000
Sales value	$1,050,000.00	$1,560,000.00	$2,880,000.00
Less : Separable Processing Cost	$441,000.00	$180,000.00	$263,000.00
Net Realizable Value	$609,000.00	$1,380,000.00	$2,617,000.00	$4,606,000.00
Joint cost allocation %	13.22%	29.96%	56.82%	100%
The amount of joint costs allocated to product DBB-3 = Total Joint cost x Joint cost allocation %
The amount of joint costs allocated to product DBB-3 = $44,00,000 x 56.82%
The amount of joint costs allocated to product DBB-3 = $24,99,957