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In: Accounting

Why are approximated, rather than actual, net realizable values at split-off sometimes used to allocate joint cost?

Why are approximated, rather than actual, net realizable values at split-off sometimes used to allocate joint cost?

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Expert Solution

Approximated net realizable values are necessary when some or all of the joint products cannot be sold at the split-off point. An approximated net realizable value is calculated by subtracting the incremental separate costs incurred between split-off and point of sale from the expected final sales price of the product. Thus the additional approximations are the final sale price and the incremental separate costs.

Approximated net realizable values are necessary when some or all of the joint products cannot be sold at the split-off point. 

Samantha Mae Cerdeño answered 2 years ago
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