Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Berkel Company processes sugar cane into three products.During May,the joint costs of processing were $600,000.Production and sales value information for the month were as follows:
 $$\begin{array} { | l | c | c | c | } 
\hline { \text { Product } } & \text { Units Produced } & \begin{array} { c } 
\text { Sales Value at } \
\text { Splitoff Point }
\end{array} & \begin{array} { c } 
\text { Separable } \
\text { costs }
\end{array} \
\hline \text { Sugar } & 15,000 & \$ 200,000 & \$ 60,000 \
\hline \text { Sugar Syrup } & 10,000 & 175,000 & 192,000 \
\hline \text { Fructose Syrup } & 5,000 & 125,000 & 96,000 \
\hline
\end{array}$$ Required:
Determine the amount of joint cost allocated to each product if the sales value at splitoff method is used.

Accepted Answer

The answer of Berkel Company processes sugar cane into three...

Question 3

Why do accountants criticize the practice of carrying inventories at estimated net realizable values?

Accepted Answer

A)  The costs of producing the products are usually estimates. 
B)  There is usually no clearly defined realizable value for any inventories. 
C)  In effect, this practice recognizes income before sales are made. 
D)  It will result in higher cost of goods sold and lesser profits. 
A)  The costs of producing the products are usually estimates. 
B)  There is usually no clearly defined realizable value for any inventories. 
C)  In effect, this practice recognizes income before sales are made. 
D)  It will result in higher cost of goods sold and lesser profits.

Question 4

The constant gross-margin percentage NRV method is the only method of allocating joint costs under which products may receive negative allocations.

Accepted Answer

A) True 
 B)False

Question 5

Answer the following questions using the information below:
The Kenton Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The following information was collected for the month of June:
Direct Materials processed: 18,000 gallons (after shrinkage)
 $\begin{array}{|l|l|r|r|}
\hline \text { Production: } & \text { Butter Cream } & 7,500 & \text { gallons } \
\hline & \text { Condensed Milk } & 10,500 & \text { gallons } \
\hline \text { Sales: } & \text { Butter Cream } & 7,000 & \text { gallons } \
\hline & \text { Condensed Milk } & 10,000 & \text { gallons } \
\hline \text { Sales Price: } & \text { Butter Cream } & \$ 3.5 & \text { per gallon } \
\hline & \text { Condensed Milk } & \$ 7.5 & \text { per gallon } \
\hline \begin{array}{l}
\text { Separable costsin } \
\text { total: }
\end{array}  & \text { Butter Cream } & \$ 12,500 \
\hline & \text { Condensed Milk } & \$ 34,700\
\hline
\end{array}$ The cost of purchasing the of unprocessed milk and processing it up to the splitoff point to yield a total of 18000 gallons of saleable product was $46,000.
The company uses constant gross-margin percentage NRV method to allocate the joint costs of production.
-Which of the following statements is true of Kenton's joint cost allocations?

Accepted Answer

A)  The gross margin is same for both products because constant gross margin percentage NRV method ignores profits earned before the splitoff point. 
B)  One product can receive negative joint costs allocations to bring the other unprofitable product to the overall average gross margin. 
C)  Kenton has chosen the easiest method for allocating its joint costs of production. 
D)  The gross profit percent of condensed milk is lower than the gross profit of butter cream. 
A)  The gross margin is same for both products because constant gross margin percentage NRV method ignores profits earned before the splitoff point. 
B)  One product can receive negative joint costs allocations to bring the other unprofitable product to the overall average gross margin. 
C)  Kenton has chosen the easiest method for allocating its joint costs of production. 
D)  The gross profit percent of condensed milk is lower than the gross profit of butter cream.

Question 6

Byproducts are recognized in the general ledger either at the time production is completed or at the time of sale.

Accepted Answer

A) True 
 B)False

Question 7

Physical measures such as weight or volume are the best indicators of the benefits received for allocating joint costs.

Accepted Answer

A) True 
 B)False

Question 8

Answer the following questions using the information below:
The Kenton Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The following information was collected for the month of June:
Direct Materials processed: 18,000 gallons (after shrinkage)
 $\begin{array}{|l|l|r|r|}
\hline \text { Production: } & \text { Butter Cream } & 7,500 & \text { gallons } \
\hline & \text { Condensed Milk } & 10,500 & \text { gallons } \
\hline \text { Sales: } & \text { Butter Cream } & 7,000 & \text { gallons } \
\hline & \text { Condensed Milk } & 10,000 & \text { gallons } \
\hline \text { Sales Price: } & \text { Butter Cream } & \$ 3.5 & \text { per gallon } \
\hline & \text { Condensed Milk } & \$ 7.5 & \text { per gallon } \
\hline \begin{array}{l}
\text { Separable costsin } \
\text { total: }
\end{array}  & \text { Butter Cream } & \$ 12,500 \
\hline & \text { Condensed Milk } & \$ 34,700\
\hline
\end{array}$ The cost of purchasing the of unprocessed milk and processing it up to the splitoff point to yield a total of 18000 gallons of saleable product was $46,000.
The company uses constant gross-margin percentage NRV method to allocate the joint costs of production.
-What is the allocated joint costs of Condensed Milk?

Accepted Answer

A)  $35,200 
B)  $10,800 
C)  $12,500 
D)  $34,700 
A)  $35,200 
B)  $10,800 
C)  $12,500 
D)  $34,700

Question 9

Answer the following questions using the information below:
The Alfarm Corporation processes raw milk up to the splitoff point where two products, cream and liquid skim, are produced and sold. There was no beginning inventory. The following material was collected for the month of February:
 $\begin{array}{lll}
\text { Direct materials processed: } && 750,000 \text { gallons }(727,500 \text { gallons of good product) } \
\text { Production: } & \text { Cream } & 442,500 \text { gallons } \
& \text { Liquid skim } & 285,000 \text { gallons } \
\text { Sales: } & \text { Cream } & 421,500 \text { at } \$ 110 \text { per gallon } \
& \text { Liquid skm } & 273,000 \text { at } \$ 100 \text { per gallon }
\end{array}$ The cost of purchasing 750,000 gallons of direct materials and processing it up to the splitoff point to yield a total of 727,500 gallons of good product was $2,280,000.
-Which of the following statements about Alfarm's joint production costs is true?

Accepted Answer

A)  The gross-margin percentage per gallon of Cream and Liquid skim are equal because joint costs are allocated based on the number of gallons. 
B)  The gross-margin percentage per gallon of Cream is higher than gross margin percentage per gallon of Liquid skim because of Cream's higher production volume. 
C)  The joint production cost per gallon of Cream and Liquid skim are equal because joint costs are allocated based on the number of gallons. 
D)  The joint production cost per gallon of Cream is higher than joint production cost per gallon of Liquid skim because of Cream's higher production volume. 
A)  The gross-margin percentage per gallon of Cream and Liquid skim are equal because joint costs are allocated based on the number of gallons. 
B)  The gross-margin percentage per gallon of Cream is higher than gross margin percentage per gallon of Liquid skim because of Cream's higher production volume. 
C)  The joint production cost per gallon of Cream and Liquid skim are equal because joint costs are allocated based on the number of gallons. 
D)  The joint production cost per gallon of Cream is higher than joint production cost per gallon of Liquid skim because of Cream's higher production volume.

Question 10

Calamata Corporation processes a single material into three separate products A,B,and C.During September,the joint costs of processing were $300,000.Production and sales value information for the month were as follows:
 $$\begin{array} { | c | c | c | c | } 
\hline \text { Product } & \text { Units Produced } & \begin{array} { c } 
\text { Final Sales } \
\text { Value per Unit }
\end{array} & \begin{array} { c } 
\text { Separable } \
\text { Costs }
\end{array} \
\hline \text { A } & 10,000 & \$ 25 & \$ 125,000 \
\hline \text { B } & 15,000 & 30 & 250,000 \
\hline \text { C } & 12,500 & 24 & 125,000 \
\hline
\end{array}$$ Required:
Determine the amount of joint cost allocated to each product if the constant gross-margin percentage NRV method is used.

Accepted Answer

The gross margin per

Question 11

Answer the following questions using the information below:
Netzone Company is in semiconductor industry and fabrication of silicon-wafer chips splits off two types of memory chips, Standard and Premium. The following information was collected for last quarter of the calendar year:
 $\text { Direct materials processed: } 200 \mathrm{kgs} \text { (Both standard and premium chips weigh } 10 \text { grams each) }$
$\begin{array}{lll}
\text { Production: } & \text { Standard } & 10,000 \text { chips } \
& \text { Premium } & 6,500 \text { chips } \
\text { Sales: } & \text { Standard } & 9,500 \text { at } \$ 100 \text { per chip } \
& \text { Premium } & 6,000 \text { at } \$ 170 \text { per chip }
\end{array}$ The cost of purchasing 200 kgs of direct materials and processing it up to the splitoff point to yield a total of 16,500 chips of good products was $1,950,000.
Beginning inventories totalled 100 chips for Standard and 50 chips for Premium. Ending inventory amounts reflected 100 chips of Standard and 50 chips of Premium. October costs per unit were the same as November.
-When using a physical-volume measure,what is the approximate amount of joint costs that will be allocated Premium chips?

Accepted Answer

A)  $768,182 
B)  $1,170,000 
C)  $975,000 
D)  $780,000 
A)  $768,182 
B)  $1,170,000 
C)  $975,000 
D)  $780,000

Question 12

Which of the following statements is true of the methods for allocating joint costs?

Accepted Answer

A)  Under the cause-and-effect criterion, the physical-measure method is highly desirable. 
B)  Byproducts are never excluded from the denominator used in the physical-measure method. 
C)  The NRV method is never used when the selling prices of joint products vary frequently. 
D)  The sales value at splitoff method follows the benefits-received criterion of cost allocation. 
A)  Under the cause-and-effect criterion, the physical-measure method is highly desirable. 
B)  Byproducts are never excluded from the denominator used in the physical-measure method. 
C)  The NRV method is never used when the selling prices of joint products vary frequently. 
D)  The sales value at splitoff method follows the benefits-received criterion of cost allocation.

Question 13

The physical-measure method ________.

Accepted Answer

A)  allocates joint costs to joint products in a way that each product has an identical gross-margin percentage 
B)  allocates joint costs to joint products on the basis of a comparable physical measure at the splitoff point 
C)  allocates joint costs to joint products on the basis of the relative sales value at the splitoff point 
D)  allocates joint costs to joint products on the basis of relative NRV 
A)  allocates joint costs to joint products in a way that each product has an identical gross-margin percentage 
B)  allocates joint costs to joint products on the basis of a comparable physical measure at the splitoff point 
C)  allocates joint costs to joint products on the basis of the relative sales value at the splitoff point 
D)  allocates joint costs to joint products on the basis of relative NRV

Question 14

Oregon Lumber processes timber into four products.During January,the joint costs of processing were $280,000.There was no inventory at the beginning of the month.Production and sales value information for the month is as follows:
 $$\begin{array} { | l | r | r | r | } 
\hline & &  { \text { Sales Value at } } \
\hline \text { Product } & \text { Board feet } & \text { Splitoff Point } & \text { Ending Inventory } \
\hline 2 \times 4 \text { 's } & 6,000,000 & \$ 0.30 \text { per board foot } & 500,000 \mathrm { bdft } . \
\hline 2 \times 6 \text { 's } & 3,000,000 & 0.40 \text { per board foot } & 250,000 \mathrm { bdft } . \
\hline 4 \times 4 \text { 's } & 2,000,000 & 0.45 \text { per board foot } & 100,000 \mathrm { bdft } . \
\hline \text { Slabs } & 1,000,000 & 0.10 \text { per board foot } & 50,000 \mathrm { bdft } . \
\hline
\end{array}$$ Required:
Determine the value of ending inventory if the sales value at splitoff method is used for product costing.Round to 3 decimal places when necessary.

Accepted Answer

The answer of Oregon Lumber processes timber into four products.During...

Question 15

Beverage Drink Company processes direct materials up to the splitoff point where two products,A and B,are obtained.The following information was collected for the month of July: Direct materials processed: 2,500 liters (with 20% shrinkage)
$\begin{array}{lll}
\text { Production: } & \text { A } & 1,500 \text { liters } \
& \text { B } & 500 \text { liters } \
\text { Sales: } & \text { A } & \$ 15.00 \text { per liter } \
& \text { B } & \$ 10.00 \text { per liter }\

\end{array}$ The cost of purchasing 2,500 liters of direct materials and processing it up to the splitoff point to yield a total of 2,000 liters of good products was $4,500.There were no inventory balances of A and B.
Product A may be processed further to yield 1,375 liters of Product Z5 for an additional processing cost of $150.Product Z5 is sold for $25.00 per liter.There was no beginning inventory and ending inventory was 125 liters.
Product B may be processed further to yield 375 liters of Product W3 for an additional processing cost of $275.Product W3 is sold for $30.00 per liter.There was no beginning inventory and ending inventory was 25 liters.
If Product Z5 and Product W3 are produced,what are the expected sales values of production,respectively?

Accepted Answer

A)  $11,250 and $34,375 
B)  $22,500 and $ 5,000 
C)  $31,250 and $10,500 
D)  $34,375 and $11,250 
A)  $11,250 and $34,375 
B)  $22,500 and $ 5,000 
C)  $31,250 and $10,500 
D)  $34,375 and $11,250

Question 16

Cola Drink Company processes direct materials up to the splitoff point where two products,A and B,are obtained.The following information was collected for the month of July: Direct materials processed: 2,500 liters (with 20% shrinkage)
$\begin{array}{lll}
\text { Production: } & \text { A } & 1,500 \text { liters } \
& \text { B } & 500 \text { liters } \
\text { Sales: } & \text { A } & \$ 15.00 \text { per liter } \
& \text { B } & \$ 10.00 \text { per liter }\

\end{array}$ The cost of purchasing 2,500 liters of direct materials and processing it up to the splitoff point to yield a total of 2,000 liters of good products was $4,500.There were no inventory balances of A and B.
Product A may be processed further to yield 1,375 liters of Product Z5 for an additional processing cost of $150.Product Z5 is sold for $25.00 per liter.There was no beginning inventory and ending inventory was 125 liters.
Product B may be processed further to yield 375 liters of Product W3 for an additional processing cost of $275.Product W3 is sold for $30.00 per liter.There was no beginning inventory and ending inventory was 25 liters.
What is Product Z5's estimated net realizable value at the splitoff point?

Accepted Answer

A)  $11,100 
B)  $22,350 
C)  $34,225 
D)  $34,375 
A)  $11,100 
B)  $22,350 
C)  $34,225 
D)  $34,375

Question 17

Which of the following statements is true of the methods for allocating joint costs?

Accepted Answer

A)  Constant gross-margin percentage method results in same joint production cost per unit for all products. 
B)  Estimated net realizable value method results in same gross margin percentage for all products. 
C)  Present value allocation method is the least preferred method due to its complex calculations. 
D)  Sales value at splitoff method uses the sales value of the entire production of the accounting period to allocate costs. 
A)  Constant gross-margin percentage method results in same joint production cost per unit for all products. 
B)  Estimated net realizable value method results in same gross margin percentage for all products. 
C)  Present value allocation method is the least preferred method due to its complex calculations. 
D)  Sales value at splitoff method uses the sales value of the entire production of the accounting period to allocate costs.

Question 18

Answer the following questions using the information below:
Netzone Company is in semiconductor industry and fabrication of silicon-wafer chips splits off two types of memory chips, Standard and Premium. The following information was collected for last quarter of the calendar year:
 $\text { Direct materials processed: } 200 \mathrm{kgs} \text { (Both standard and premium chips weigh } 10 \text { grams each) }$
$\begin{array}{lll}
\text { Production: } & \text { Standard } & 10,000 \text { chips } \
& \text { Premium } & 6,500 \text { chips } \
\text { Sales: } & \text { Standard } & 9,500 \text { at } \$ 100 \text { per chip } \
& \text { Premium } & 6,000 \text { at } \$ 170 \text { per chip }
\end{array}$ The cost of purchasing 200 kgs of direct materials and processing it up to the splitoff point to yield a total of 16,500 chips of good products was $1,950,000.
Beginning inventories totalled 100 chips for Standard and 50 chips for Premium. Ending inventory amounts reflected 100 chips of Standard and 50 chips of Premium. October costs per unit were the same as November.
-What are the physical-volume proportions for products Standard and Premium,respectively?

Accepted Answer

A)  60.00% and 40.00% 
B)  55.00% and 45.00% 
C)  60.61% and 39.39% 
D)  54.00% and 46.00% 
A)  60.00% and 40.00% 
B)  55.00% and 45.00% 
C)  60.61% and 39.39% 
D)  54.00% and 46.00%

Question 19

The benefits-received criteria for allocating joint costs indicate market-based measures are preferred because ________.

Accepted Answer

A)  physical measures such as quantity are clear bases for allocating cost than other measures 
B)  physical measures are more difficult to calculate 
C)  revenues are usually the best indicators of the benefits received 
D)  revenues always remain consistent over short-run 
A)  physical measures such as quantity are clear bases for allocating cost than other measures 
B)  physical measures are more difficult to calculate 
C)  revenues are usually the best indicators of the benefits received 
D)  revenues always remain consistent over short-run

Question 20

In joint costing,the physical measures are generally used for products or services that are processed and,after splitoff,additional value is added to the product and a selling price can be determined.

Accepted Answer

A) True 
 B)False

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

Why do accountants criticize the practice of carrying inventories at estimated net realizable values?

The constant gross-margin percentage NRV method is the only method of allocating joint costs under which products may receive negative allocations.

Byproducts are recognized in the general ledger either at the time production is completed or at the time of sale.

Physical measures such as weight or volume are the best indicators of the benefits received for allocating joint costs.

Which of the following statements is true of the methods for allocating joint costs?

The physical-measure method ________.

Which of the following statements is true of the methods for allocating joint costs?

The benefits-received criteria for allocating joint costs indicate market-based measures are preferred because ________.

In joint costing,the physical measures are generally used for products or services that are processed and,after splitoff,additional value is added to the product and a selling price can be determined.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters

Exam 16: Cost Allocation: Joint Products and Byproducts

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

Why do accountants criticize the practice of carrying inventories at estimated net realizable values?

The constant gross-margin percentage NRV method is the only method of allocating joint costs under which products may receive negative allocations.

Byproducts are recognized in the general ledger either at the time production is completed or at the time of sale.

Physical measures such as weight or volume are the best indicators of the benefits received for allocating joint costs.

Which of the following statements is true of the methods for allocating joint costs?

The physical-measure method ________.

Which of the following statements is true of the methods for allocating joint costs?

The benefits-received criteria for allocating joint costs indicate market-based measures are preferred because ________.

In joint costing,the physical measures are generally used for products or services that are processed and,after splitoff,additional value is added to the product and a selling price can be determined.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters