Exam 15: Cost Allocation: Joint Products and Byproducts

Favata Corporation processes a single material into three separate products A,B,and C .During September,the joint costs of processing were $600,000.Production and sales value information for the month were as follows: Required: Determine the amount of joint cost allocated to each product if the constant gross margin percentage of NRV method is used.

Joint costs are incurred beyond the splitoff point and are assignable to individual products.

Use the information below to answer the following question(s). Troy Company processes 15,000 litres of direct materials to produce two products,Product X and Product Y.Product X,a byproduct,sells for $4 per litre,and Product Y,the main product,sells for $50 per litre.The following information is for August: The manufacturing costs totalled $95,000. -How much is the ending inventory for the byproduct if byproducts are recognized in the general ledger when production is completed?

Byproduct revenues appear in the income statement as a cost increase to the main product and as a separate item of expense.

All separable costs in joint cost allocations are always incremental costs.

Red Paper Company processes wood pulp into two products.During March the joint costs of processing were $144,000.Production and sales value information for the month were as follows: Paper sells for $2.75 a kilogram and cardboard sells for $3.50 a kilogram. There were no beginning inventories for March but ending inventories totalled 10,000 kilograms for paper and 12,000 kilograms for cardboard. Required: Prepare a product line income statement assuming that joint costs are allocated on the constant gross margin percentage method based on total production.Present production costs and separable costs individually.

Use the information below to answer the following question(s): Orange Paper Company processes wood pulp into two products.During February the joint costs of processing were $156,000.Production and sales value information for the month were as follows: Paper sells for $2.85 a kilogram and cardboard sells for $3.90 a kilogram. There were no beginning inventories for April but ending inventories totalled 15,000 kilograms for paper and 18,000 kilograms for cardboard. -How much of the Orange Paper Company joint costs should be allocated to the paper using the net realizable value method based on total production?

Use the information below to answer the following question(s). Cranbrook Chemical Ltd.manufactures two industrial compounds.In the month of May,15,000 litres of direct material costing $160,000 were processed at a cost of $400,000.The joint process yielded 16,000 containers of a compound known as Jarlon and 4,000 containers of a compound known as Kharton.The respective selling prices of Jarlon and Kharton are $38 and $58.Both products may be processed further.Jarlon may be processed into Jaxton at an incremental cost of $8 per jar of the final product while Kharton may be processed into Kraxton at an additional cost of $32 per jar of the final product.The volume of jars of the final product are: 12,000 and 3,000 for Jaxton and Kraxton respectively.The selling price of Jaxton is $48 per jar.The selling price of Kraxton is $102 per jar. -Using the sales value at splitoff method,the percentage weightings for joint cost allocations for Jarlon and Kharton respectively are

Use the information below to answer the following questions: Argon Manufacturing Company processes direct materials up to the splitoff point where two products (U and V)are obtained and sold.The following information was collected for last quarter of the calendar year: Direct materials processed: 20,000 gallons (20,000 gallons yield 19,000 gallons of good product and 1,000 gallons of shrinkage) The cost of purchasing 20,000 gallons of direct materials and processing it up to the splitoff point to yield a total of 19,000 gallons of good products was $1,950,000. Beginning inventories totaled 100 gallons for U and 50 gallons for V.Ending inventory amounts reflected 600 gallons of Product U and 1,050 gallons of Product V.October costs per unit were the same as November. -What is the joint cost allocation to product U using the sales value at splitoff method?

What are separable costs?

Answer the following question(s)using the information below. The Oxnard Corporation processes a liquid component up to the splitoff point where two products,Mr.DirtOut and Mr.SinkClean,are produced and sold.There was no beginning inventory.The following material was collected for the month of January: Direct materials processed: 250,000 litres (242,500 litres of good product) The cost of purchasing 250,000 litres of direct materials and processing it up to the splitoff point to yield a total of 242,500 litres of good product was $380,000. -What are the physical volume proportions to allocate joint costs for Mr.DirtOut and Mr.SinkClean,respectively?

Land and Sea Corporation processes frozen chicken.The company has not been pleased with its profit margin per product because it appears that the high value items have too few costs assigned to them while the low value items have too many costs assigned to them.The processing results in several products,the primary one of which is frozen small hens.Other products include frozen parts such as wings and legs,byproducts such as skin and bones,and unused scrap items. Required: What may be the cost assignment problem if a key consideration is the value of the products being sold?

Answer the following question(s)using the information below: The Morton Company processes unprocessed goat milk up to the splitoff point where two products,condensed goat milk and skim goat milk result.The following information was collected for the month of October: Direct materials processed: 65,000 litres (shrinkage was 10%) The costs of purchasing the 65,000 litres of unprocessed goat milk and processing it up to the splitoff point to yield a total of 58,500 litres of salable product was $72,240.There were no inventory balances of either product. Condensed goat milk may be processed further to yield 19,500 litres (the remainder is shrinkage)of a medicinal milk product,Xyla,for an additional processing cost of $3 per usable litre.Xyla can be sold for $18 per litre. Skim goat milk can be processed further to yield 28,100 litres of skim goat ice cream,for an additional processing cost per usable litre of $2.50.The product can be sold for $9 per litre. There are no beginning and ending inventory balances. -Using the sales value at splitoff method,what is the gross margin percentage for skim goat milk at the splitoff point?

Use the information below to answer the following question(s): Orange Paper Company processes wood pulp into two products.During February the joint costs of processing were $156,000.Production and sales value information for the month were as follows: Paper sells for $2.85 a kilogram and cardboard sells for $3.90 a kilogram. There were no beginning inventories for April but ending inventories totalled 15,000 kilograms for paper and 18,000 kilograms for cardboard. -What will be the total incremental benefit or (loss)from all potential sales of processing the paper beyond the splitoff point?

Juno Ltd.manufactures three separate products Q,R,and S from a joint production process .During March,the joint costs of processing were $875,000.Production and sales value information for the month were as follows: Required: Determine the amount of joint cost allocated to each product if the constant gross margin percentage NRV method is used.

What type of cost is the result of an event that results in multiple products simultaneously?

Which of the following is FALSE concerning manufacturing of joint products and joint costing?

Golden Company uses one raw material,gold ore,for all its products.It spends considerable time getting the gold from the ore before it starts the actual processing of the finished products,rings,lockets,etc.Traditionally,the company made one product at a time and charged the product with all costs of production,from ore to final inspection.However,in recent months the cost accounting reports have been somewhat disturbing to management.It seems that some of the finished products are costing more than they should,even to the point of approaching their retail value.It has been noted by the accounting manager that this problem began when the company started buying ore from different parts of the world,some of which requires difficult extraction methods. Required: Can you explain how the company might change its accounting system to better reflect the reporting problems? Are there other problems with the purchasing area?

The amount of the joint costs is an important factor when considering to sell a product at the splitoff point or process it further.

Recognizing byproduct cost at the time of sale is based on the matching principle.