Question
In: Accounting
Describe the conceptual flaw associated with the net realizable value method that relates to where the...
Describe the conceptual flaw associated with the net realizable value method that relates to where the value added takes place during the production process
Solutions
Expert Solution
net realisable value refers to the actual value realised less all expenses relating to a sale.
In general The net realisable value method allocates joint costs on the basis of final sales value less separable costs.
Final price refrs to the price paid by the customer
Let us see the example of net realisable value calculation
TYPE A B TOTAL
production 20000 24000 44000
unit price 50 35
sales value(A) 1000000 840000 1840000
Separable costs (B)
per unit 12 10
ToTal 240000 240000 480000
NRV(A-B) 760000 600000 1360000
Separable cost = unit produced * cost per unit
NRV 760000 600000 1360000
NRV % 55.88 44.12
joint cost ALLOCATION 502941 397059
irrespective of number of units produced joint cost is allocated on basis of NRV so when the unit price is more and numner of units produces are less, but higher amount joint cost is allocated to the product with higher NRV rather than more the product with more number of units produced.
ekkarill92 answered 1 year agoRelated Solutions
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Specifically the allowance method of accounting for the net
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3/31: $100,000 of merchandise was sold on account. The gross
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Describe the net realizable value rule and when firms can use it.
Describe the net realizable value rule and when firms can use
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Physical Units Method, Relative Sales-Value-at-Split-off Method, Net Realizable Value Method, Decision Making Sonimad Sawmill, Inc. (SSI),...
Physical Units Method, Relative Sales-Value-at-Split-off Method,
Net Realizable Value Method, Decision Making
Sonimad Sawmill, Inc. (SSI), purchases logs from independent
timber contractors and processes them into the following three
types of lumber products:
Studs for residential construction (e.g., walls and
ceilings)
Decorative pieces (e.g., fireplace mantels and beams for
cathedral ceilings)
Posts used as support braces (e.g., mine support braces and
braces for exterior fences around ranch properties)
These products are the result of a joint sawmill process that
involves...
Physical Units Method, Relative Sales-Value-at-Split-off Method, Net Realizable Value Method, Decision Making Sonimad Sawmill, Inc. (SSI),...
Physical Units Method, Relative Sales-Value-at-Split-off Method,
Net Realizable Value Method, Decision Making
Sonimad Sawmill, Inc. (SSI), purchases logs from independent
timber contractors and processes them into the following three
types of lumber products:
Studs for residential construction (e.g., walls and
ceilings)
Decorative pieces (e.g., fireplace mantels and beams for
cathedral ceilings)
Posts used as support braces (e.g., mine support braces and
braces for exterior fences around ranch properties)
These products are the result of a joint sawmill process that
involves...
Physical Units Method, Relative Sales-Value-at-Split-off Method, Net Realizable Value Method, Decision Making Sonimad Sawmill, Inc. (SSI),...
Physical Units Method, Relative Sales-Value-at-Split-off Method,
Net Realizable Value Method, Decision Making
Sonimad Sawmill, Inc. (SSI), purchases logs from independent
timber contractors and processes them into the following three
types of lumber products:
Studs for residential construction (e.g., walls and
ceilings)
Decorative pieces (e.g., fireplace mantels and beams for
cathedral ceilings)
Posts used as support braces (e.g., mine support braces and
braces for exterior fences around ranch properties)
These products are the result of a joint sawmill process that
involves...
Physical Units Method, Relative Sales-Value-at-Split-off Method, Net Realizable Value Method, Decision Making Sonimad Sawmill, Inc. (SSI),...
Physical Units Method, Relative Sales-Value-at-Split-off Method,
Net Realizable Value Method, Decision Making
Sonimad Sawmill, Inc. (SSI), purchases logs from independent
timber contractors and processes them into the following three
types of lumber products:
Studs for residential construction (e.g., walls and
ceilings)
Decorative pieces (e.g., fireplace mantels and beams for
cathedral ceilings)
Posts used as support braces (e.g., mine support braces and
braces for exterior fences around ranch properties)
These products are the result of a joint sawmill process that
involves...
Physical Units Method, Relative Sales-Value-at-Split-off Method, Net Realizable Value Method, Decision Making Sonimad Sawmill, Inc. (SSI),...
Physical Units Method, Relative Sales-Value-at-Split-off Method,
Net Realizable Value Method, Decision Making
Sonimad Sawmill, Inc. (SSI), purchases logs from independent
timber contractors and processes them into the following three
types of lumber products:
Studs for residential construction (e.g., walls and
ceilings)
Decorative pieces (e.g., fireplace mantels and beams for
cathedral ceilings)
Posts used as support braces (e.g., mine support braces and
braces for exterior fences around ranch properties)
These products are the result of a joint sawmill process that
involves...
Physical Units Method, Relative Sales-Value-at-Split-off Method, Net Realizable Value Method, Decision Making Sonimad Sawmill, Inc. (SSI),...
Physical Units Method, Relative Sales-Value-at-Split-off Method,
Net Realizable Value Method, Decision Making Sonimad Sawmill, Inc.
(SSI), purchases logs from independent timber contractors and
processes them into the following three types of lumber products:
Studs for residential construction (e.g., walls and ceilings)
Decorative pieces (e.g., fireplace mantels and beams for cathedral
ceilings) Posts used as support braces (e.g., mine support braces
and braces for exterior fences around ranch properties) These
products are the result of a joint sawmill process that involves...
Physical Units Method, Relative Sales-Value-at-Split-off Method, Net Realizable Value Method, Decision Making Sonimad Sawmill, Inc. (SSI),...
Physical Units Method, Relative Sales-Value-at-Split-off Method,
Net Realizable Value Method, Decision Making
Sonimad Sawmill, Inc. (SSI), purchases logs from independent
timber contractors and processes them into the following three
types of lumber products:
Studs for residential construction (e.g., walls and
ceilings)
Decorative pieces (e.g., fireplace mantels and beams for
cathedral ceilings)
Posts used as support braces (e.g., mine support braces and
braces for exterior fences around ranch properties)
These products are the result of a joint sawmill process that
involves...
Physical Units Method, Relative Sales-Value-at-Split-off Method, Net Realizable Value Method, Decision Making Sonimad Sawmill, Inc. (SSI),...
Physical Units Method, Relative Sales-Value-at-Split-off Method,
Net Realizable Value Method, Decision Making
Sonimad Sawmill, Inc. (SSI), purchases logs from independent
timber contractors and processes them into the following three
types of lumber products:
Studs for residential construction (e.g., walls and
ceilings)
Decorative pieces (e.g., fireplace mantels and beams for
cathedral ceilings)
Posts used as support braces (e.g., mine support braces and
braces for exterior fences around ranch properties)
These products are the result of a joint sawmill process that
involves...
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