Exam 6: Joint and By-Product Costing

Park Company produces three products in a joint process: A, B, and C. The joint costs are described as follows: Direct materials £45,000 Direct labour 60,000 Overhead 30,000 The split-off values for A, B, and C are £100,000, £120,000 and £80,000, respectively. If management processes A beyond the split-off point, the sales value of A would increase to £150,000. In order to process A further, the company must rent another facility for £24,000, as well as incur additional materials and labour costs equal to £15,000. a.What is the amount of joint costs allocated to products A, B, and C if the sales value at split-off value method is used? b.Should the division process A further or sell it at split-off? What is the effect of the decision on gross profit?

Figure 6-6 Suppose that a sawmill processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of £300,000: Grade Board Feet Final Sales Value First and second 75,000 £56,250 No. 1 common 200,000 180,000 No. 2 common 100,000 105,000 No. 3 common 125,000 127,500 -Refer to Figure 6-6. What is the gross profit of No. 3 common if the constant gross margin percentage method is used?

Ottawa Ltd. produces two products from a joint process. Information about the two joint products is as follows: Product Product Anticipated production (in kgs) 2,000 4,000 Selling price per kg at split-off £30 £16 Additi onal processing costs per after split-off (all variable) £15 £30 Selling price per kg after further processing £40 £50 -Refer to Figure 6-12. Ottawa currently sells both products at the split-off point. If Ottawa makes decisions that maximize profit, Ottawa's profit will increase by

Figure 6-4 Deli Products produces two products, X and Y, in a single process. In 2011, the joint costs of this process were £25,000. In addition, 4,000 units of X and 6,000 units of Y were produced. Separable processing costs beyond the split-off point were: X-£10,000; Y-£20,000. X sells for £10.00 per unit; Y sells for £7.50 per unit. -Refer to Figure 6-4. What is the gross profit of product Y assuming the net realizable value method is used?

A ____ is a secondary product recovered in the course of manufacturing a primary product during a joint process.

Jazzmyne Company manufactures two products from a joint process. Information about the two joint products is as follows: Product X Product Y Anticipated production (in units) 10,000 15,000 Selling price per unit at split-off £60 £100 Additional processing costs per unit after split-off (all variable) £100 £55 Selling price per unit after further processing £150 £175 The cost of the joint process is £1,750,000. a.Which of Jazzmyne's joint products should be processed further? b.Assume that Jazzmyne currently sells both products at the split-off point. What is Jazzmyne's income? c.Assume that Jazzmyne makes decisions about its joint products that maximize profit. What is Jazzmyne's income?

Refer to Figure 6-2. How much joint cost would be allocated to product J based on total weight?

Maxwell Company manufactures two products from a joint process. Information about the two joint products is as follows: Product ABC Froduct XYZ Anticipated production (in gall ons) 40,000 50,000 Selling price per gall on at split-off £50 £60 Additional processing costs per gallon after split-off (all variable) £25 £95 Selling price per gall on after further Processing £100 £140 The cost of the joint process is £1,500,000. a.Which of Maxwell's joint products should be processed further? b.Assume that Maxwell currently sells both products at the split-off point. What is Maxwell's income? c.Assume that Maxwell makes decisions about its joint products that maximize profit. What is Maxwell's income?

Mickey Company manufactures three joint products: X, Y, and Z. The cost of the joint process is £30,000. Information about the three products follows: Anticipated production 5,600 10,000 2,500. Selling price/kg. at split-off £2.00 £1.00 £3.00 Additional processing costs/kg. after split-off (all variable) £1.50 £1.25 £.75 Selling price/kg. after further processing £2.50 £3.75 £6.25 Allocated joint costs £12,000 £10,500 £7,500 a.Determine whether each product should be sold at split-off or processed further. Show all supporting calculations in good form. b.Determine the firm's income if the firm processed all three products beyond split-off.

Refer to Figure 6-2. How much joint cost would be allocated to product L based on total weight?

Information about three joint products follows: A B C Anticipated production 5,000. 1,000. 2,000 Selling price /. at split-off £10 £30 £16 Additional processing costs /. after split-off (all variable) £6 £12 £24 Selling price/kg. after further processing £20 £40 £50 The cost of the joint process is £60,000. Which of the joint products should be sold at split-off?

Which joint cost allocation method is described by the following statement? Joint cost is prorated to the products on the basis of each product's share of units.

Arcadia, SA, uses a joint process to produce Products W, X, Y, Z. Each product may be sold at its split-off point or processed further. Additional processing costs of specific products are entirely variable. Joint processing costs for a single batch of joint products are £200,000. Other relevant data are as follows: Sales Value Additional Sales Value of Product at Split-off Processing Costs Final Froduct W £40,000 £24,000 £70,000 X 16,000 10,000 20,000 Y 20,000 10,000 48,000 Z 24,000 16,000 36,000 £100,000 £60,000 £174,00 a.Determine which products should be processed further. b.How will processing each product further affect profits?

Which of the following costs is NOT relevant to a decision to sell a product at split-off or to process the product further and then sell the product?

Figure 6-10 Manning Company uses a joint process to produce products W, X, Y, and Z. Each product may be sold at its split-off point or processed further. Additional processing costs of specific products are entirely variable. Joint processing costs for a single batch of joint products are £120,000. Other relevant data are as follows: Sales Value Additional Sales Value of Froduct at Split-Off Processing Costs Final Product Y £20,000 £32,000 £120,000 Z 28,000 20,000 32,000 W 40,000 60,000 80,000 X 12,000 4,000 20,000 £100,000 £116,000 £252,000 -Refer to Figure 6-10. Which products should Manning process further?

Figure 6-9 Stars Manufacturing Company produces Products A1, B2, C3, and D4 through a joint process. The joint costs amount to £200,000. If Processed Further Sales Value Additional Product Units Produced at Split-Off Costs Sales Value A1 3,000 £10,000 £2,500 £15,000 B2 5,000 30,000 3,000 35,000 C3 4,000 20,000 4,000 25,000 D4 6,000 40,000 6,000 45,000 -Refer to Figure 6-9. If Product B2 is processed further, profits will

Amos, SA., manufactures products A and B from a joint process. Joint product costs were £40,000 during the month of October. Additional information is as follows: Sales Value at Product Units Produced Split-Off A 14,000 £110,000 B 6,000 £90,000 Amos uses the sales-value-at-split-off method of joint cost allocation. What is the amount of joint product costs to be allocated to products A and B in October, respectively?

Nelson SA. obtains two products and a by-product from its production process. By-product revenues are treated as other income and a noncost approach is used to assign costs to them. During the period, 1,200 units were processed at a cost of £12,000 for materials and conversion costs, resulting in the following: Sales Value Costs after Final Product Units at Separation Separation Value 200 £4,000 £2,000 £10,000 400 5,000 6,000 12,000 By-product 150 500 500 1,500 a.Account for all costs using a physical basis for allocation. b.Account for all costs using net realizable value as the basis for allocation. c.Account for all costs using final sales value as the basis for allocation. d.How much joint costs should be allocated to the by-product?

Figure 6-5 Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs £50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of £60 per unit and £40 per unit for Dulls. The market price is £250 for Brights and £200 for Dulls. -Refer to Figure 6-5. What is the amount of joint costs allocated to Brights using the net realizable value method?

Figure 6-7 Suppose that a concrete manufacturer produces four grades of concrete totaling 500,000 cubic yards as follows at a joint cost of £2,000,000: Grade Cubic Yards Sales Value A 75,000 £375,000 B 200,000 1,200,000 C 100,000 700,000 D 125,000 850,000 -Refer to Figure 6-7. Grade C can be made into bricks. The final sales value will increase to £900,000. The additional cost to make the bricks is £250,000. Should the concrete be processed into bricks?