When the selling prices of all products at the split-off point are unavailable, the NRV method is the best alternative for allocating joint costs.
What is NRV method?
- When two goods are manufactured concurrently in a joint costing system up until the products reach a split-off point, NRV is utilized to account for such expenses.
- After the split-off point, each product is manufactured independently, with the prior joint expenses being divided among the products using NRV.
- Managers are thus able to determine the overall expense and determine the specific sale price for each product. An asset's worth is often assessed using the net realizable value (NRV) approach for inventory accounting.
- It is discovered by calculating the difference between the asset's anticipated selling price and all of the expenses related to the asset's eventual sale.
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