Estimated net realizable value method:

According to this joint cost allocation method, there is a variation of the relative sales value method. The difference is total under the NRV method all costs which are already separate necessary to make the product saleable are subtracted before the allocation is made and then multiplied by joint cost.

For explaining this method we have many examples but the example which I am going to give there that is from the Oil sector. The Oil rigging is a process to produce the oil which a natural resource but during the producing process there are many other by products which we abstract from this process the oil companies use the same resources but with the different production costs which are actually joint costs with each other. That example helps us to understand these methods.

“Gleim’s book 15^th edition for the CMA-USA students and Professionals is the source of all the examples and this topic”

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