ACCOUNTING-Approximated net realizable value method
Approximated net realizable value methodScent of Money makes three products that can be sold at split-off or processed further and then sold. The joint cost for April 2013 is $1,080,000.Product Bottles of Output Sales Price at Split-Off Seperate Cost after Split-Off Final Sales PricePerfume 20,000 $7.00 $2.50 $16.50Eau de toilette 32,000 $5.00 $1.50 $13.00Body Splash 28,000 $5.00 $2.00 $12.00The number of ounces in a bottle of each product is: perfume, one; eau de toilette, two; and body splash, three. Assume that all products are processed further after split-off.a. Allocate the joint cost based on the number of bottles, weight, and approximated net realizable values at split-off. Round to the nearest whole percentage.Perfume$Eau de Toilette$Body Splash$b. Assume that all products are processed further and completed. At the end of the period, the inventories are as follows: perfume, 600 bottles; eau de toilette, 1,600 bottles; and body splash, 1,680 bottles. Determine the values of the inventories based on answers obtained in (a). Round per-unit costs to the nearest cent and the final answers to the nearest dollar.Ending inventory valuation based on units of output$Ending inventory valuation based on weight$Ending inventory valuation based on approximated NRV$c. Do you see any problems with the allocation based on approximated net realizable value?
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