The correct answer is: B. total production cost of each product
The constant gross margin percentage NRV method is a method of allocating joint costs to joint products based on the relative net realizable values (NRVs) of the products at the split-off point. The first step in this method is to calculate the total production cost of each product. This is done by adding up the direct costs and allocated joint costs incurred in producing each product. The next step is to calculate the NRV of each product at the split-off point. This is done by subtracting the costs of further processing from the selling price of each product. The final step is to allocate the joint costs to the joint products based on their relative NRVs. The amount of joint cost allocated to each product is equal to the product’s NRV multiplied by the constant gross margin percentage.
The other options are incorrect because:
- Option A: Gross margin percentage is not calculated in the first step of the constant gross margin percentage NRV method. It is calculated in the final step, after the joint costs have been allocated to the joint products.
- Option C: Allocated joint costs are the costs that are assigned to the joint products based on some allocation method. They are not calculated in the first step of the constant gross margin percentage NRV method.
- Option D: Cost of split-off point is the cost of producing a joint product up to the split-off point. It is not calculated in the first step of the constant gross margin percentage NRV method.