The Horn Company operates a simple chemical process to convert a single material into three separate items, referred to here as $x,Y,$ and $Z.$ All three end

products are separated simultaneously at a single splitoff point.

$($i$)($Click the icon for additional information.$)$

During $2017,$ the selling prices of the items and the total amounts sold were as follows:

$($i$)($Click the icon to view the sales information.$)$

Read the requirements. $($YOU ONLY NEED TO DO REQUIREMENT $1,$ PART A$!)$

$($a$)$ Start with the NRV cost allocation method. Begin by computing the net realizable value for total production at the point of splitoff and the weighting for each product. $($Enter the weights to two decimal places.$)$

Net realizable value of total production at splitoff

Weighting

NRV method:

Joint costs allocated

Additional costs to process

Total productions costs

Determine the formula needed to compute the cost of goods sold using the NRV method.

$$

$=$ Cost $of$ goods sold $(NRV$ method$)$

Compute the cost of goods sold for income statement purposes as of December $31,2017,$ using the NRV cost allocation method.

NRV method:

$x$

Cost of goods sold

Total

Determine the formula needed to compute the cost of ending inventory using the NRV method.

$=$ Ending inventory $(NRV$ method$)$

Compute the cost of inventories of $x,Y,$ and $Z$ for balance sheet purposes as of December $31,2017,$ using the NRV cost allocation method.

NRV method:

Total

Requirements

Compute the cost of inventories of $x,Y,$ and $Z$ for balance sheet purposes and the cost of goods

sold for income statement purposes as of December $31,2017,$ using the

following joint$-$cost$-$allocation methods:

a$.$ NRV $($Net realizable value$)$ method

b$.$ Constant gross$-$margin percentage NRV method

Compare the gross$-$margin percentages for $x,Y,$ and $Z$ using the two methods given in

requirement $1.$

More info

$x-96$ tons sold for $$1,500$ per ton

$Y-340$ tons sold for $$1,000$ per ton

$Z-280$ tons sold for $$600$ per ton

The total joint manufacturing costs for the year were $$410,000.$ Horn spent an

additional $$180,000$ to finish product $Z.$ There were no beginning inventories of $x$

$Y,$ or $Z.$ At the end of the year, the following inventories of completed units were

on hand: $x,224$ tons; $Y,60$ tons; $Z,220$ tons. There was no beginning or ending

work in process.

Products $x$ and $Y$ are ready for sale immediately upon splitoff without further

processing or any other additional costs. Product $Z,$ however, is processed further

before being sold. There is no available market price for $Z$ at the splitoff point. The

selling prices quoted here are expected to remain the same in the coming year.