Relative Sales Value | Accounting

The Relative Sales Value method helps in allocating joint costs based on the prices at which products will be sold. It is basically the process calculating all costs of multiple products produced at the same time in the factory and further helps in analyzing and tracking the profit they will earn from the investment made. Copy the link given below and paste it in new browser window to get more information on Relative Sales Value:- http://www.transtutors.com/homework-help/accounting/inventories-valuation-using-relative-sales-value/

1. RELATIVE SALES VALUE

2. WHAT IS RELATIVE SALES VALUE METHOD? The relative sales value method is the process calculating all costs of multiple products produced at the same time in the factory and further helps in analyzing and tracking the profit .

3. ADVANTAGES OF USING RELATIVE SALES VALUE METHOD Controls cost: This method helps in allocating the actual cost incurred in production as owner also invest in various assets like plant, machinery, building, etc. for starting a business.

4. ADVANTAGES OF USING RELATIVE SALES VALUE METHOD Financial decision: After allocating different costs for different products to find the profit margin of each product allows the firm to make decision in favor of that product which has high profit margins and high sales volume .

5. ADVANTAGES OF USING RELATIVE SALES VALUE METHOD Prepare proper accounts: Relative sales value method helps in preparing accounts up to date as it considers all the assets of the firm to allocate costs and track profit margins.

6. WHAT IS MEANT BY JOINT COST? Joint costs is the expense benefits to two or more products but cannot be separated for different products in the production process.

7. Split-off point is the point at which production of two or more products are separated after jointly produced till some stage in the manufacturing process. WHAT IS MEANT BY THE TERM SHPLIT-OFF POINT?

8. Find the joint-production costs Calculate sales price and number of units of jointly manufactured products. Divide the total sales price of each product to the total sales price. Calculate the joint cost using relative sales values . HOW DO YOU CALCULATE JOINT COST USING RELATIVE SALES VALUE METHOD?

9. EXAMPLE OF CALCULATING JOINT COST OR VALUE OF SALES In this example, allocation of joint costs is made and thus, profits can be calculated easily. Joint cost is divided into 60% and 40% for cocoa butter and cocoa powder respectively. Profit of cocoa butter is $90 (750-660) and cocoa powder is $60 (500-440).

10. WHAT IS BASKET PURCHASE? Basket Purchase means a buyer buying number of assets altogether in a single transaction. It is the opportunity for the buyer to buy all those assets at a price less than their combined market values. It is also known as lump-sum purchase .

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