exercise 11-44 (algo) estimated net realizable value method -- solve for unknowns (lo 11-3) gunston…

exercise 11-44 (algo) estimated net realizable value method -- solve for unknowns (lo 11-3) gunston processing produces two products, alt-1 and alt-2, from a batch using a single raw material, alt-0. both products require further processing before they be can be sold. a batch of alt-1 can be sold for $154,000 after processing costs of $46,000. a batch of alt-2 can be sold for $241,600 after further processing. the cost of alt-0 is $200,000 for a batch. using the estimated net realizable value method, a joint cost of $120,000 was allocated to alt-2 for a batch. required: compute the separable processing cost for a batch of alt-2. note: do not round intermediate calculations. processing cost

exercise 11-44 (algo) estimated net realizable value method -- solve for unknowns (lo 11-3) gunston processing produces two products, alt-1 and alt-2, from a batch using a single raw material, alt-0. both products require further processing before they be can be sold. a batch of alt-1 can be sold for $154,000 after processing costs of $46,000. a batch of alt-2 can be sold for $241,600 after further processing. the cost of alt-0 is $200,000 for a batch. using the estimated net realizable value method, a joint cost of $120,000 was allocated to alt-2 for a batch. required: compute the separable processing cost for a batch of alt-2. note: do not round intermediate calculations. processing cost

Answer

Explanation:

Step1: Calculate net realizable value of ALT - 1

Net realizable value of ALT - 1 = Selling price of ALT - 1 - Processing cost of ALT - 1 $=154000 - 46000=108000$

Step2: Let the net realizable value of ALT - 2 be $NRV_{2}$

We know that the joint cost of the raw - material is $200000$. Let the joint cost allocated to ALT - 1 be $J_{1}$ and to ALT - 2 be $J_{2}=120000$. So, $J_{1}=200000 - 120000 = 80000$ Since, under the net realizable value method, $\frac{J_{1}}{NRV_{1}}=\frac{J_{2}}{NRV_{2}}$ Substituting the known values: $\frac{80000}{108000}=\frac{120000}{NRV_{2}}$ $NRV_{2}=\frac{120000\times108000}{80000}=162000$

Step3: Calculate separable processing cost of ALT - 2

Let the separable processing cost of ALT - 2 be $C$. We know that $NRV_{2}=$ Selling price of ALT - 2 - $C$ $C =$ Selling price of ALT - 2 - $NRV_{2}$ $C=241600 - 162000 = 79600$

Answer:

$79600$