RKH Corporation Produces Three Joint Products

question 23

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
Which of the following methods will result in the greatest total joint cost allocation among the three products?
I. Net realizable value
II. Sales value at split-off point
III. Physical output
IV. Constant gross margin NRV

• A)I and II only
• B)II and III only
• C)I and IV only
• D)All methods will result in the same total joint cost allocated

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Definitions:

Net Sales

The total revenue generated from sales activities after deducting returns, allowances, and discounts.

Days' Sales in Inventory

A financial ratio that indicates the average time in days that a company takes to turn its inventory into sales.

Ending Inventory

The overall value of products for sale at the close of a fiscal period.

Cost of Goods Sold

Directly associated expenditures for producing the goods a business sells, including the cost of materials and labor.