Net realisable value method

The net realisable value method allocates joint costs between joint products in proportion to each product's final sales value minus its separable costs incurred after split-off.

ByHoang TruongUpdated July 11, 2026

See it move

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A joint process costs €45,000 and yields Products A and B, neither saleable at split-off. Product A's net realisable value is €65,000 sales less €15,000 further processing, €50,000; Product B's is €35,000 less €10,000, €25,000. Against a combined €75,000, the joint cost splits €30,000 to A and €15,000 to B, in proportion to each product's net realisable value.

Where it fits

SubjectCost AccountingCoreTopicJoint Products, By-Products & SpoilageCore

The formula

LaTeX

NRV_i = SV_i - SC_i

Variables

$N R V_{i}$: Net realisable value of product i (€)
$S V_{i}$: Final sales value of product i (€)
$S C_{i}$: Separable processing costs of product i (€)

Values a joint product at what it can fetch net of the cost of getting it from split-off to a sellable state.

LaTeX

JC_i = JC \times \frac{NRV_i}{\sum_j NRV_j}

Variables

$J C_{i}$: Joint cost allocated to product i (€)
$J C$: Total joint cost (€)
$N R V_{i}$: Net realisable value of product i (€)
$\sum_{j} N R V_{j}$: Total net realisable value across all joint products (€)

Splits the shared joint cost across products in proportion to their relative net realisable values.

Check yourself

PracticeCORE

A joint process costs €60,000 and yields products X and Y, neither saleable at split-off. Product X sells for €95,000 after €15,000 of further processing; Product Y sells for €55,000 after €15,000 of further processing. Using the net realisable value method, what joint cost is allocated to Product X?

Select an answer to check your understanding.