Stone Company manufactures two products that incur joint costs of $60,000. It costs an
additional $10,000 to produce 5,000 units of Product 1 and an additional $30,000 to
produce 10,000 units of Product 2. Product 1 is sold for $8 per unit, and Product 2 is sold for
$10 per unit. If the company uses the net realizable value method to allocate joint costs, the
cost per unit of Product 1 is

Answer (C) is correct.
Product 1 Product 2
Number of units 5,000 10,000
Price per unit × $8
× $10
Final sales price $40,000 $100,000
Separable costs (10,000)
(30,000)
Net realizable value $30,000
$ 70,000
This yields a total net realizable value (NRV) for the entire production
run of $100,000 ($30,000 Product 1 + $70,000 Product 2). The next step is to allocate the total joint costs of $60,000 based on the proportion of
the total NRV represented by each product: Product 1 = $60,000 ×
($30,000 ÷ $100,000) = $18,000. Product 2 = $60,000 × ($70,000 ÷
$100,000) = $42,000. The cost per unit of Product 1 is therefore $2
($10,000 ÷ 5,000 units) separable costs + $3.60 ($18,000 ÷ 5,000 units)
joint cost = $5.60.