Question 1

Zenon Chemical, Inc., processes pine rosin into three products: turpentine, paint thinner, and spot remover. During May, the joint costs of processing were $240,000. Production and sales value information for the month is as follows:
  
Required:
Determine the amount of joint cost allocated to each product if the physical-measure method is used.

Accepted Answer

The answer of Zenon Chemical, Inc., processes pine rosin into...

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:
  
Required:
Determine the amount of joint cost allocated to each product if the sales value at split-off method is used.

Accepted Answer

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

Question 3

Paragon University operates an extensive and an expensive registration, testing, and counseling center, through which all students are required to pass through when they enter the university. The registration effort's costs (for the most part) are almost impossible to allocate based upon which students require time, effort, etc. The cost of this center is approximately 15% of the total costs of Paragon. This department engages in no other activities than the registration of students. Paragon is interested in determining the profitability of the three technical departments it operates. Paragon has the perception that some departments are more profitable than others, and it would like to determine an appropriate method of allocating the costs of this registration center.
Required:
Recommend to Paragon University a method (or methods) of allocating the costs of registration to the three departments.

Accepted Answer

The answer of Paragon University operates an extensive and an...

Question 4

Which of the following statements is true of the methods for allocating joint costs?
A) The sales value at split-off method lacks a common basis for allocating joint costs to products.
B) The complexity of the sales value at split-off method increases when managers make frequent changes to the sequence of post-split-off processing decisions.
C) The NRV method assumes that none of the markup is attributable to the separable costs.
D) The NRV method treats the joint products as though they comprise a single product.

Accepted Answer

The Net Realizable Value (NRV) method allocates joint costs based on the final sales value minus separable costs, assuming that the markup is not attributable to the separable costs but to the joint process.

Question 5

The drawback of the constant gross-margin percentage NRV method in joint costing is that it ________.
A) recognizes that profits are derived from the costs incurred after split-off
B) assumes the profit margin to be identical across all products
C) attempts to approximate the sales values at split-off by subtracting from final selling prices the separable costs incurred after the split-off point
D) ignores the separable costs of further processing

Accepted Answer

The constant gross-margin percentage NRV method assumes that the profit margin is identical across all products, which may not be true in reality as different products may have different demand, competition, and production costs. This can lead to inaccurate allocation of joint costs and over- or under-costing of products.

Question 6

The constant gross-margin percentage NRV method is the only method whereby products can receive negative allocations.

Accepted Answer

The constant gross-margin percentage NRV method is unique in the sense that it allows for negative allocations, which means that some products may be assigned a cost that is higher than their selling price. This can happen when the net realizable value (NRV) of a product falls below its cost, leading to a negative margin. The other cost allocation methods, such as the FIFO or average cost methods, do not permit negative allocations.

Question 7

In joint costing, the constant gross-margin percentage method recognizes that the profit margin is not just attributable to the joint process but is also derived from the costs incurred after split-off.

Accepted Answer

The constant gross-margin percentage method recognizes that the profit margin is not just attributable to the joint process but is also derived from the costs incurred after split-off.

Question 8

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:
  
Required:
Determine the value of ending inventory if the sales value at split-off 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....

Question 9

Pilgrim Corporation processes frozen turkeys. 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 turkeys. 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?

Accepted Answer

The answer of Pilgrim Corporation processes frozen turkeys. The company...

Question 10

When the selling prices at the split-off are unavailable, the NRV method is the best alternative.

Accepted Answer

When the selling prices at the split-off are not available, the NRV (Net Realizable Value) method is the best alternate method to determine the value of joint products. The NRV method estimates the selling prices of the joint products after further processing minus the estimated costs of completion and the selling expenses. Therefore, statement A is true.

Question 11

When the selling prices of all products at the split-off point are unavailable, the ________ is the best alternative for allocating joint costs.
A) sales value at split-off method
B) NRV method
C) physical measures method
D) constant gross-margin percentage method

Accepted Answer

When selling prices at the split-off point are unavailable, the Net Realizable Value (NRV) method is typically the best choice for allocating joint costs. It takes into account the estimated revenue that will be generated from each product after further processing beyond the split-off point, minus any additional costs that will be incurred to get the products ready for sale. This method typically provides a more accurate representation of the relative value of each product, compared to other allocation methods that rely on less direct or less specific measures of value.

Question 12

Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned tomatoes. During the summer of 2017, the joint costs of processing the tomatoes were $420,000. There was no beginning or ending inventories for the summer. Production and sales value information for the summer is as follows:
  
Required:
Determine the amount allocated to each product if the estimated net realizable value method is used, and compute the cost per case for each product.

Accepted Answer

The answer of Red Sauce Canning Company processes tomatoes into...

Question 13

Under the benefits-received criterion, the physical-measure method is much less desirable than the sales value at split-off method. Why?

Accepted Answer

The answer of Under the benefits-received criterion, the physical-measure method...

Question 14

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

Accepted Answer

Sales value is a better indicator of the benefits received than the physical measures.

Question 15

For each of the following methods of allocating joint costs, give a positive or a negative aspect of selecting each one to allocate joint costs.
a.sales value at split-off
b.estimated net realizable value method
c.the constant gross margin method
d.a physical measure such as volume

Accepted Answer

The answer of For each of the following methods of...

Question 16

Which of the following is not true of the joint allocation methods?
A) the sales value at the split-off method is the best measure of benefits received
B) when selling prices of all products at the split-off are unavailable, the NRV method is the best alternative
C) the constant gross-margin percentage NRV method treats the joint products as though they comprise a single product
D) when selling prices are at the split-off point are available but further processing is necessary, the NRV method is the preferred allocation method

Accepted Answer

The NRV method is used when selling prices at the split-off point are not available, not when they are available but further processing is necessary.

Question 17

In joint costing, which method assumes that all the markup is attributable to the joint process costs?
A) sales value at split-off method
B) NRV method
C) constant gross-margin percentage method
D) physical measures method

Accepted Answer

The answer of In joint costing, which method assumes that...

Question 18

Wharf Fisheries processes many of its seafood items to the demands of its largest customers, most of which are large retail distributors. To keep the accounting system simple, it has always assigned cost by the weight of the finished product. However, with increased competition, it has had to watch its prices closely and, in recent years, several items have incurred zero profit margins. After several weeks of investigation, your consulting firm has found that, while weight is important in processing of seafood, numerous items have very distinct processing steps and some items are processed through more steps than others.
Required:
Based on the findings of your consulting firm, what changes might you recommend to the company in the way of cost allocation among its products?

Accepted Answer

The answer of Wharf Fisheries processes many of its seafood...

Question 19

The constant gross-margin percentage NRV method allocates joint costs to joint products in such a way that the gross margin on each joint product is the same as it was in the previous year.

Accepted Answer

The constant gross-margin percentage NRV method allocates joint costs to joint products in such a way that the overall gross margin percentage is identical for the individual products.

Question 20

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:
  
Required:
Determine the amount of joint cost allocated to each product if the constant gross-margin percentage NRV method is used.

Accepted Answer

The answer of Calamata Corporation processes a single material into...

Quiz 16: Cost Allocation: Joint Products and Byproducts

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

The drawback of the constant gross-margin percentage NRV method in joint costing is that it ________.

The constant gross-margin percentage NRV method is the only method whereby products can receive negative allocations.

In joint costing, the constant gross-margin percentage method recognizes that the profit margin is not just attributable to the joint process but is also derived from the costs incurred after split-off.

When the selling prices at the split-off are unavailable, the NRV method is the best alternative.

When the selling prices of all products at the split-off point are unavailable, the ________ is the best alternative for allocating joint costs.

Under the benefits-received criterion, the physical-measure method is much less desirable than the sales value at split-off method. Why?

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

For each of the following methods of allocating joint costs, give a positive or a negative aspect of selecting each one to allocate joint costs. a.sales value at split-off b.estimated net realizable value method c.the constant gross margin method d.a physical measure such as volume

Which of the following is not true of the joint allocation methods?

In joint costing, which method assumes that all the markup is attributable to the joint process costs?

The constant gross-margin percentage NRV method allocates joint costs to joint products in such a way that the gross margin on each joint product is the same as it was in the previous year.