Question

Hancock Machining manufactures A, B, and C, all of which are joint products, and D, which is classified as a by-product. If joint manufacturing costs amount to $450,000 and the company is using a popular accounting method, the firm will:I. allocate $450,000 among A, B, and C.II. allocate $450,000 among A, B, C, and D.III. increase $450,000 by the net realizable value of D and then allocate the total among A, B, and C.IV. decrease $450,000 by the net realizable value of D and then allocate the total among A, B, and C.

Answer 1

IV. decrease $450,000 by the net realizable value of D and then allocate the total among A, B, and C

Step-by-step explanation:

The reasoning is that this by-product has little value in relationship with the main product.Therefore It will generate no gain.

It will be record as inventory and their cost will be equal to his net realizable value and when sold, It will generate a revenue for the same amount. This will generate no profit for the company to reflect the little importance of this product into the business operations.

This will reduce the allocate post for the joint-products inthis case, A B and C