(Net realizable value allocation) D. Staley Communications is a sports-band network and television company with three sendee groups: Games, News, and Documentaries. In May, the company incurred $12,000,000 of joint product cost for facilities and administration. Revenues and separate produc¬ tion costs of each group for May follow:

a. What amount of joint cost is allocated to each service group using the net realizable value approach? Compute the profit for each group after the allocation.

b. What amount of joint cost is allocated to each sendee group if the allo¬ cation is based on revenues? Compute the profit for each group after the allocation.

c. Assume you are head of the Games Group. Would the difference in al¬ location bases create significant problems for you when you report to the company’s board of directors? Develop a short presentation to make to the board if the allocation base in part

(b) is used to determine each group’s relative profitability. Be certain to discuss important differences in revenues and cost figures for the Games and Documentaries groups. LO1.

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Games News Documentaries Revenue $18,000,000 Separate costs 17,000,000 $15,000,000 8,000,000 $95,000,000 55,000,000