Question 1

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 NRV method allocates joint costs to joint products based on their relative sales value at the split-off point, not to achieve an identical gross-margin percentage.

Question 2

Answer the following questions using the information below:
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
 $$\begin{array} { | l | l | r | r | } 
\hline \text { production: } & \text { butter Cream } & 12,500 & \text { gallons } \
\hline & \text { Condensed Milk } & 15,500 & \text { gallons } \
\hline \text { Sales: } & \text { Gutter Cream } & 12,000 & \text { gallons } \
\hline & \text { Condensed Milk } & 15,006 & \text { gallons } \
\hline \text { Sales: } & \text { butter Cream } & \$ 2.5 & \text { per gallon } \
\hline & \text { Condensed Milk } & \$ 5.5 & \text { per gallon } \
\hline \text { Separable costs in } & & & \
\text { total: } & \text { butter Cream } & \$ 13,500 & \
\hline  & \text { Condensed Milk } & \$ 33,708 & \
\hline
\end{array}$$ The costs of purchasing the of unprocessed milk and processing it up to the splitoff point to yield a total of 28,000 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 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 splitoff 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 Answer the following questions using the information...

Question 3

The sales-value at splitoff 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 4

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

Accepted Answer

Carrying inventories at estimated net realizable values means recognizing income before sales are actually made, which goes against the accrual accounting principle of recognizing revenue when it is earned. This can result in inflated profits and misrepresent the financial position of the company. Therefore, this practice is criticized by accountants.

Question 5

In joint costing,the sales value at splitoff method is typically used in preference to the NRV method only when net realizable value for one or more products at splitoff 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 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 splitoff method

Accepted Answer

The answer of The constant gross-margin percentage NRV method of...

Question 7

Answer the following questions using the information below:
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
 $$\begin{array} { | l | l | r | r | } 
\hline \text { production: } & \text { butter Cream } & 12,500 & \text { gallons } \
\hline & \text { Condensed Milk } & 15,500 & \text { gallons } \
\hline \text { Sales: } & \text { Gutter Cream } & 12,000 & \text { gallons } \
\hline & \text { Condensed Milk } & 15,006 & \text { gallons } \
\hline \text { Sales: } & \text { butter Cream } & \$ 2.5 & \text { per gallon } \
\hline & \text { Condensed Milk } & \$ 5.5 & \text { per gallon } \
\hline \text { Separable costs in } & & & \
\text { total: } & \text { butter Cream } & \$ 13,500 & \
\hline  & \text { Condensed Milk } & \$ 33,708 & \
\hline
\end{array}$$ The costs of purchasing the of unprocessed milk and processing it up to the splitoff point to yield a total of 28,000 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?
A) $34,500
B) $13,500
C) $33,700
D) $11,500

Accepted Answer

The constant gross-margin percentage NRV method allocates joint costs based on the net realizable value (NRV) of each product. First, calculate the NRV for each product by subtracting separable costs from sales revenue. Then, determine the gross margin percentage and apply it to allocate joint costs. The NRV for Condensed Milk is higher, leading to a larger allocation of joint costs, which is $34,500.

Question 8

The only allowable method of joint cost allocation is specified by FASB.

Accepted Answer

Although FASB provides guidance on joint cost allocation, it does not specify the only allowable method. There are different methods available, such as the relative sales value method or the physical quantity method, that may be appropriate depending on the circumstances.

Question 9

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 10

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 can result in negative allocations for some products, as their individual gross margin percentages are lower than the overall joint cost allocation percentage.

Question 11

The constant gross-margin percentage method differs from market-based joint-cost allocation method (sales value at splitoff and estimated net realizable value)since no account is taken of profits earned before or after the splitoff 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 12

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

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 13

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

Accepted Answer

The constant gross-margin percentage NRV method is an example of allocating costs using value measures, not physical measures. It involves allocating joint costs based on the net realizable value (NRV) of each product, which takes into account its expected selling price and expected costs of completion and disposal.

Question 14

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

Accepted Answer

Joint costs are allocated based on the physical measures of the outputs, but only outputs with sales value or potential are included in the allocation process. Outputs with no sales value, such as waste or by-products, are typically excluded from the allocation of joint costs because they do not contribute to the revenue-generating process.

Question 15

Answer the following questions using the information below:
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
 $$\begin{array} { | l | l | r | r | } 
\hline \text { production: } & \text { butter Cream } & 12,500 & \text { gallons } \
\hline & \text { Condensed Milk } & 15,500 & \text { gallons } \
\hline \text { Sales: } & \text { Gutter Cream } & 12,000 & \text { gallons } \
\hline & \text { Condensed Milk } & 15,006 & \text { gallons } \
\hline \text { Sales: } & \text { butter Cream } & \$ 2.5 & \text { per gallon } \
\hline & \text { Condensed Milk } & \$ 5.5 & \text { per gallon } \
\hline \text { Separable costs in } & & & \
\text { total: } & \text { butter Cream } & \$ 13,500 & \
\hline  & \text { Condensed Milk } & \$ 33,708 & \
\hline
\end{array}$$ The costs of purchasing the of unprocessed milk and processing it up to the splitoff point to yield a total of 28,000 gallons of saleable product was $46,000.
The company uses constant gross-margin percentage NRV method to allocate the joint costs of production.
-If separable costs of Butter Cream was 16,000 and constant gross margin was 25%,what would have been the allocated joint costs of Condensed Milk?
A) $7,438
B) $7,538
C) $30,238
D) $30,338

Accepted Answer

The answer of Answer the following questions using the information...

Question 16

In joint costing,the sales value at splitoff method allocates joint costs entirely to joint products sold during the accounting period on the basis of the relative total sales value at the splitoff 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 17

The sales value at splitoff 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 18

In joint costing,using physical measures at splitoff 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 19

Answer the following questions using the information below:
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
 $$\begin{array} { | l | l | r | r | } 
\hline \text { production: } & \text { butter Cream } & 12,500 & \text { gallons } \
\hline & \text { Condensed Milk } & 15,500 & \text { gallons } \
\hline \text { Sales: } & \text { Gutter Cream } & 12,000 & \text { gallons } \
\hline & \text { Condensed Milk } & 15,006 & \text { gallons } \
\hline \text { Sales: } & \text { butter Cream } & \$ 2.5 & \text { per gallon } \
\hline & \text { Condensed Milk } & \$ 5.5 & \text { per gallon } \
\hline \text { Separable costs in } & & & \
\text { total: } & \text { butter Cream } & \$ 13,500 & \
\hline  & \text { Condensed Milk } & \$ 33,708 & \
\hline
\end{array}$$ The costs of purchasing the of unprocessed milk and processing it up to the splitoff point to yield a total of 28,000 gallons of saleable product was $46,000.
The company uses constant gross-margin percentage NRV method to allocate the joint costs of production.
-If separable costs of Butter Cream was 16,000 and constant gross margin was 25%,what would have been the total allocated joint costs of production?
A) $37,675
B) $33,700
C) $30,238
D) $34,500

Accepted Answer

The total allocated joint costs of production would be $37,675. This is calculated by taking the separable costs of Butter Cream ($16,000) and dividing it by the constant gross margin (25%), which gives us $64,000. We then subtract the separable costs of Butter Cream from this amount to get the total allocated joint costs of production ($64,000 - $16,000 = $37,675).

Question 20

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

Accepted Answer

Obtaining physical measures for all products may not always be an easy task. It can be time-consuming and require specialized equipment or training.

Quiz 16: Cost Allocation: Joint Products and Byproducts