Exercise $2$

A dairy farm produces milk, cheese, and butter from a common input of raw milk at a total cost of $$18,000.$

The estimated sales prices and additional costs of the products are as follows:

Milk $($$$4,000$ with an additional cost of $$1,000$ for an NRV of $$3,000),$

Cheese $($$$8,000$ with an additional cost of $$3,000$ for an NRV of $$5,000),$ and

Butter $($$$7,000$ with an additional cost of $$2,500$ for an NRV of $$4,500).$

Subtracting additional costs from the sales price will give you the Net Realizable Value of each product. The percentage basis of the total Net Realizable Value is $$12,000.$

Using the net realizable value method:

$1.-$ Assign the value of joint costs