Exam 6: Joint and By-Product Costing

Moore Manufacturing Company makes two products from a common input. Joint processing costs up to the split-off point total £23,400. The company allocates the joint costs to the products on the basis of their total sales values at split-off. The total sales value at split-off for both products is the same. Each product may be sold at the split-off point or processed further. Data concerning one of these products are as follows: Sales value at split-off £15,000 Cost of further processing 10,000 Sales value after further processing 30,000 What is the minimum amount the company would accept for this product if it is to be sold at the split-off point?

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. Which of Ottawa's joint products should be processed further?

Lake Ltd. manufactures two products, AA and BB, from a joint process. A production run costs £20,000 and results in 500 units of AA and 2,000 units of BB. Both products must be processed past the split-off point, incurring separable costs of £5 per unit for AA and £10 per unit for BB. The market price is £25 for AA and £20 for BB. a.Allocate joint production costs to each product using the physical units method. b.Allocate joint production costs to each product using the net realizable value method. c.Allocate joint production costs to each product using the constant gross margin percentage method.

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 physical units method of joint cost allocation. What is the amount of joint product costs to be allocated to products A and B in October, respectively?

Figure 6-8 James Ltd. produces three products in a joint process: A, B, and C. The joint costs are as follows: Direct materials £50,000 Direct labour 20,000 Overhead 40,000 The split-off values for A, B, and C are £80,000, £100,000, and £60,000, respectively. If management processes the three products beyond the split-off point, sales values for A, B, and C would increase to £150,000, £130,000, and £120,000, respectively. In order to process the products further, the company must incur separable costs of £14,000, £12,000, and £10,000 for products A, B, and C, respectively. James uses the sales-value-at-split-off method to allocate joint costs. -Refer to Figure 6-8. Should James Ltd. process C further?

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. Processing Y further will cause profits to

Which of the following methods allocates joint production costs based on their proportionate share of eventual revenue less further processing costs?

The sales-value-at-split-off method allocates joint production costs based on each product's share of

Joint products are

Figure 6-8 James Ltd. produces three products in a joint process: A, B, and C. The joint costs are as follows: Direct materials £50,000 Direct labour 20,000 Overhead 40,000 The split-off values for A, B, and C are £80,000, £100,000, and £60,000, respectively. If management processes the three products beyond the split-off point, sales values for A, B, and C would increase to £150,000, £130,000, and £120,000, respectively. In order to process the products further, the company must incur separable costs of £14,000, £12,000, and £10,000 for products A, B, and C, respectively. James uses the sales-value-at-split-off method to allocate joint costs. -Refer to Figure 6-8. Should James Ltd. process B further?

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. What is the gross profit of Grade D if the constant gross margin percentage method is used?

Which of the following industries would most likely have joint costs in production?

Carey Ltd. manufactures Products X and Y from a joint process. Joint product costs were £60,000 during the month of December. Additional information is as follows: Sales Value at Product Units Produced Split-Off per Unit X 10,000 £24 Y 5,000 £8 What is the amount of joint product costs to be allocated to Product X during December using the sales-value-at-split-off method?

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. Which product(s) should be sold at split-off to maximize profits in the short run?

Refer to Figure 6-2. How much joint cost would be allocated to Product K based on the total sales value method?

Anderson Company pays a flat fee of £500 for the right to retrieve stray golf balls from lakes and ponds at golf and country clubs. The recovered balls are then cleaned, graded as to quality (birdie, bogey, or duffer), and sold to sporting goods stores at the following prices per dozen: birdie quality, £5; bogey quality, £4; and duffer quality, £3. Last month £8,000 of cost was incurred retrieving the following quantities of golf balls: birdie quality, 1000 dozen; bogey quality, 3,000 dozen; and duffer quality, 2,000 dozen. a.Determine the cost and gross profit per cent for each type of golf ball using the physical units method of joint cost allocation. b.Repeat part (a) using the sales-value-at-split-off method of joint cost allocation. c.The company has an opportunity to sell bogey quality balls for £4.50 per dozen to a company that operates golf driving ranges; however, the balls will have to be painted and striped. The company estimates that the cost of painting and striping will be 60 cents per dozen. Assuming the physical unit method is used to allocate joint costs, should the offer be accepted?

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 Dulls using the constant gross margin percentage method?

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 gross profit for Dulls assuming the constant gross margin percentage method is used?

Which of the following is a by-product of agricultural and food Industries?

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 physical units method is used?