Joint cost allocation McKenzie's Soap Sensations, Inc., produces hand soaps with three different scents: morning glory, snowflake sparkle, and sea breeze. The soap is produced through a joint production process that costs $30,000 per batch. Each batch produces 14,800 bottles of morning glory hand soap, 12,000 bottles of snowflake sparkle hand soap, and 10,000 bottles of sea breeze hand soap at the split-off point. Each product is processed further after the split-off point, but the market value of a bottle of any of the flavors at this point is estimated to be $1.25 per bottle. The additional processing costs of morning glory, snowflake sparkle, and sea breeze hand soap are $0.50, $0.55, and $0.60 per bottle, respectively. Morning glory, snowflake sparkle, and sea breeze hand soap are then sold for $2.00, $2.20, and $2.40 per bottle, respectively. 1. Using the net realizable value method, allocate the joint costs of production to each product. Round your answers to two decimal places. 18,500 Total Market Value at Split-Off Market Price per Bottle Added Cost per Bottle 1.25 X 0x NRV per Bottle 22,200 X Total Net Realizable Value 18,500 19,800 X 15,000 0 X 18,000 X 12,500 Joint Product Bottles per Batch Market Value per Bottle at Split-Off Morning glory hand soap 14,800 1.25 Snowflake sparkle hand soap 12,000 1.25 V 15,000 Sea breeze hand soap Totals 10,000 36,800 1.25 V 12,500 2. The company plans to process each type of hand soap beyond the split-off point. Identify the reason that supports this decision, a. The net realizable value of each variety of hand soap is higher than the market value at the split-off point. b. The net realizable value of each variety of hand soap is lower than the market value at the split-off point. c. The net realizable value of each variety of hand soap is equal to the market value at the split-off point. d. None of the above. 3. Assume the company can process only one type of hand soap beyond the split-off point. Which one should it be? Previous Next