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Joint cost allocation — net realizable value method Nature's Garden Inc. produces wood chips, wood pulp,...
Joint cost allocation — net realizable value method
Nature's Garden Inc. produces wood chips, wood pulp, and mulch. These products are produced through harvesting trees and sending the logs through a wood chipper machine. One batch of logs produces 20,158 cubic yards of wood chips, 14,000 cubic yards of mulch, and 9,596 cubic yards of wood pulp. The joint production process costs a total of $39,000 per batch. After the split-off point, wood chips are immediately sold for $28 per cubic yard while wood pulp and mulch are processed further. The market value of the wood pulp and mulch at the split-off point is estimated to be $22 and $20 per cubic yard, respectively. The additional production process of the wood pulp costs $6 per cubic yard, after which it is sold for $32 per cubic yard. The additional production process of the mulch costs $5 per cubic yard, after which it is sold for $30 per cubic yard.
This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the question below.
Open spreadsheet
Allocate the joint costs of production to each product using the net realizable value method. Do not round intermediate calculations. Round your answers to the nearest dollar.
| Joint Product | Allocation |
| Wood chips | $ |
| Wood pulp | |
| Mulch | |
| Totals | $ |
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| Nature's Garden Inc. | ||||
| Calculation of NRV | ||||
| Calculation of Joint cost: | Wood chips | Wood pulp | Mulch | Total |
| Sell price | 28.00 | 32.00 | 30.00 | |
| Further processing costs per unit | - | 6.00 | 5.00 | |
| NRV per unit | 28.00 | 26.00 | 25.00 | |
| Cubic's produced | 20,158.00 | 14,000.00 | 9,596.00 | |
| NRV | 564,424.00 | 364,000.00 | 239,900.00 | 1,168,324.00 |
| Allocation rate | 48.31% | 31.16% | 20.53% | 100.00% |
| G | ||||
| Allocation on the basis of NRV | Allocation rate | Joint Cost | Allocation | |
| Wood chips | 48.31% | 39,000.00 | 18,841.12 | |
| Wood pulp | 31.16% | 39,000.00 | 12,150.74 | |
| Mulch | 20.53% | 39,000.00 | 8,008.14 | |
| Totals | 39,000.00 |
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