Question 1

Which of the following is false regarding net realizable value (NRV)?
A) it is better to use a product's market value at the split-off point than its estimated NRV
B) the estimated NRV at the split-off point is calculated by taking the sales value after further processing and deducting additional processing costs
C) NRV is the estimated selling price after processing the product beyond the split-off point.
D) the constant NRV method uses an identical gross-margin percentage for each product to allocate joint costs

Accepted Answer

The answer of Which of the following is false regarding...

Question 2

In joint costing, the sales value at split-off method allocates joint costs entirely to joint products sold during the accounting period on the basis of the relative total sales value at the split-off point.

Accepted Answer

The sales value at split-off method allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the split-off point.

Question 3

In joint costing, using physical measures at split-off to allocate costs enables the accountant to obtain individual product costs and gross margins.

Accepted Answer

In joint costing, using sales value at split-off to allocate costs enables the accountant to obtain individual product costs and gross margins.

Question 4

The net realizable value (NRV) method method allocates joint costs to joint products produced during the accounting period in such a way that each individual product achieves an identical gross-margin percentage.

Accepted Answer

The constant gross-margin percentage NRV method allocates joint costs to joint products produced during the accounting period in such a way that each individual product achieves an identical gross-margin percentage.

Question 5

The net realizable value (NRV) method allocates joint costs to joint products produced during the accounting period on the basis of their relative NRV-final sales value plus separable costs.

Accepted Answer

The net realizable value (NRV) method allocates joint costs to joint products produced during the accounting period on the basis of their relative NRV-final sales value minus separable costs.

Question 6

The constant gross-margin percentage NRV method of joint cost allocation ________.
A) involves allocating costs in such a way that maintaining the same gross margin percentage for each product that was obtained in prior years
B) computes gross margin before allocating the costs to the products
C) is the same as the estimated NRV method
D) is the same as the sales-value at split-off method

Accepted Answer

The constant gross-margin percentage NRV method computes the gross margin before allocating the costs to the products, ensuring that each product maintains the same gross margin percentage.

Question 7

The constant gross-margin percentage method differs from market-based joint-cost allocation method (sales value at split-off and estimated net realizable value) since no account is taken of profits earned before or after the split-off point when allocating joint costs.

Accepted Answer

The constant gross-margin percentage method takes account of the profits earned before or after the split-off when allocating joint costs.

Question 8

The Brital 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:31,500 gallons

The costs of purchasing the of unprocessed milk and processing it up to the split-off point to yield a total of 31,500 gallons of saleable product was $109,025.
The company uses constant gross-margin percentage NRV method to allocate the joint costs of production. If separable costs of Butter Cream was $19,000 and constant gross margin was 30%, what would have been the total allocated joint costs of production?
A) $109,025
B) $35,600
C) $97,400
D) $163,625

Accepted Answer

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Question 9

The sales value at split-off method of joint cost allocation involves computation of the relative amounts of the sales value of the amount of each joint product sold during the period.

Accepted Answer

The sales value at split-off method allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the split-off point (not when the product is sold).

Question 10

The only allowable method of joint cost allocation is net realizable value which is specified by FASB.

Accepted Answer

The FASB does not specify a single allowable method of joint cost allocation.

Question 11

In joint costing, outputs with no sales value are always excluded when costs are allocated using physical measures.

Accepted Answer

In joint costing, when using physical measures for cost allocation, only outputs with a sales value are considered, as the method relies on measurable quantities that contribute to revenue.

Question 12

An advantage of the physical-measure method is that obtaining physical measures for all products is an easy task.

Accepted Answer

For some products such as gas, obtaining physical measures is difficult.

Question 13

In joint costing, the constant gross-margin percentage NRV method is an example of allocating costs using physical measures.

Accepted Answer

In joint costing, the constant gross-margin percentage NRV method is an example of allocating costs using market based data.

Question 14

The Brital 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:33,000 gallons

The costs of purchasing the of unprocessed milk and processing it up to the split-off point to yield a total of 33,000 gallons of saleable product was $55,000.
The company uses constant gross-margin percentage NRV method to allocate the joint costs of production. Which of the following statements is true of Brital?
A) The gross profit percent of condensed milk is lower than the gross profit of butter cream.
B) The gross margin is same for both products because constant gross margin percentage NRV method ignores profits earned before the split-off point.
C) The gross profit of condensed milk is lower than the gross profit of butter cream.
D) The gross margin is allocated to the joint products in order to determine the joint-cost allocations.

Accepted Answer

The answer of The Brital Company processes unprocessed milk to...

Question 15

The sales value at split-off method presupposes the exact number of subsequent steps undertaken for further processing.

Accepted Answer

The sales value at split-off method does not presuppose the exact number of subsequent steps.

Question 16

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

Accepted Answer

The constant gross-margin percentage NRV method takes into account the expected sales value of each product and allocates joint costs accordingly. As a result, if a product's expected sales value is lower than its allocated joint costs, it may receive a negative allocation under this method. None of the other commonly used joint cost allocation methods allow for negative allocations.

Question 17

In joint costing, the sales value at split-off method is typically used in preference to the NRV method only when net realizable value for one or more products at split-off do not exist.

Accepted Answer

The sales value at split-off method is the more preferred method. The NRV method is typically used in preference to the sales value at split-off method only when selling prices for one or more products at split-off do not exist.

Question 18

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

Accepted Answer

The net realizable value method is generally used for products or services that are processed and, after split-off, additional value is added to the product and a selling price can be determined.

Question 19

The Brital 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:28,000 gallons

The costs of purchasing the of unprocessed milk and processing it up to the split-off point to yield a total of 28,000 gallons of saleable product was $113,100.
The company uses constant gross-margin percentage NRV method to allocate the joint costs of production. If separable costs of Butter Cream was $17,500 and constant gross margin was 20%, what would have been the allocated joint costs of Condensed Milk?
A) $20,900
B) $34,900
C) $92,200
D) $87,200

Accepted Answer

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Question 20

The Brital 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:31,000 gallons

The costs of purchasing the of unprocessed milk and processing it up to the split-off point to yield a total of 31,000 gallons of saleable product was $146,450.
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?
A) $120,000
B) $14,500
C) $33,900
D) $26,450

Accepted Answer

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Quiz 16: Cost Allocation: Joint Products and Byproducts

Which of the following is false regarding net realizable value (NRV) ?