RKH Corporation Produces Three Joint Products

question 104

Multiple Choice

RKH Corporation produces three joint products. During a recent accounting period, joint costs totalled $365 and RKH had no beginning inventories. Additional data appear below:
M1 M2 M3
Volume (kilograms) 150 50 300
Sales value at the split-off point $375 $155 $600
Sales value after further processing $450 $200 $900
Separable costs $50 $35 $100
Using the constant gross margin NRV method, the total separable costs allocated to the three products will be:

• A) $0
• B) $185
• C) $365
• D) $550

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Definitions:

Business Conditions

The state of the economic and market environment that affects the operation, performance, and strategy of companies.

Real Options

Financial analysis techniques that value the flexibility of making future investment choices under uncertain conditions.

Worst Case Scenario

The most adverse or negative outcome that can happen in a given situation.

Potential Cash Flows

Forecasted cash receipts and payments that a company expects from its operations and investments.