Question 1

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 2

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:
 $$\begin{array} { | l | c | c | } 
\hline \text { Product } & \text { Units Produced } & \begin{array} { c } 
\text { Sales Value at } \
\text { Splitoff Point }
\end{array} \
\hline \text { Turpentine } & 15,000 \text { liters } & \$ 120,000 \
\hline \text { Paint thinner } & 15,000 \text { liters } & 100,000 \
\hline \text { Spot remover } & 7,500 \text { liters } & 50,000 \
\hline
\end{array}$$ 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 three products:...

Question 3

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 4

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

Question 5

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 splitoff
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 6

In joint costing,the sales value at splitoff method is used frequently ________.
A) in a dynamic business environment where the selling prices change frequently
B) in anticipation of subsequent management decisions
C) when selling prices are dependent on further processing decisions
D) since the selling-price data exists at the splitoff

Accepted Answer

The sales value at splitoff method is used frequently since the selling-price data exists at the splitoff point before any further processing takes place. This method is used to allocate joint costs to individual products based on their proportionate sales value at splitoff. It is mostly used in industries where the selling prices are predetermined and do not change frequently. This method assumes that the joint products are sold at the splitoff point without any further processing or additional costs.

Question 7

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 8

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 splitoff.

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 splitoff. This method allocates joint costs based on the expected gross-margin percentage of each product, which takes into account the post-splitoff costs and expected selling prices.

Question 9

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 10

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

Accepted Answer

The answer of In joint costing,the ________ assumes that all...

Question 11

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

Accepted Answer

When the selling prices of all products at the splitoff point are unavailable, the Net Realizable Value (NRV) method is the best alternative for allocating joint costs. The NRV method estimates the final selling prices of the individual products after further processing beyond the splitoff point and subtracts the necessary selling expenses and additional processing costs from those estimated selling prices. This method provides a more accurate representation of the value each product contributes to the overall revenue.

Question 12

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

Accepted Answer

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

Question 13

Red Sauce Canning Company processes tomatoes into catsup,tomato juice,and canned tomatoes.During the summer of 20X5,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:
 $$\begin{array} { | l | r | r | r | r | } 
\hline  { \text { Product } } &  { \text { Cases } } & \begin{array} { r } 
\text { Sales Value at } \
\text { Splitoff Point }
\end{array} & \text { Separable Costs } & \text { Selling Price } \
\hline \text { Catsup } & 100,000 & \$ 6 \text { per case } & \$ 3.00 \text { per case } & \$ 28 \text { per case } \
\hline \text { Tuice } & 150,000 & 8 \text { per case } & 5.00 \text { per case } & 25 \text { per case } \
\hline \text { Canned } & 200,000 & 5 \text { per case } & 2.50 \text { per case } & 10 \text { per case } \
\hline
\end{array}$$ 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 14

Which of the following statements is true of the methods for allocating joint costs?
A) The sales value at splitoff method lacks a common basis for allocating joint costs to products.
B) The complexity of the sales value at splitoff method increases when managers make frequent changes to the sequence of post-splitoff 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 15

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 16

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 takes into account any potential losses on inventory and therefore can result in negative allocations for certain products. The other methods, such as specific identification, weighted average, and FIFO, do not allow for negative allocations.

Question 17

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 has...

Question 18

In process costing,the sales value at splitoff method does not require information on the processing steps after the splitoff.

Accepted Answer

The sales value at splitoff method only considers the sales value of the products at the point of splitoff and does not require information on any processing steps that occur after the splitoff point. This means that the method can be used to allocate costs in situations where the production process is complex and involves multiple processing steps, as long as the products can be identified at the point where they become separable.

Question 19

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

Accepted Answer

Physical measures such as weight or volume do not necessarily reflect the actual benefits received by each joint product. Other factors, such as market demand and production costs, should also be considered when allocating joint costs.

Question 20

The drawback of the constant gross-margin percentage NRV method in joint costing is that ________.
A) it recognizes that profits are derived from the costs incurred after splitoff
B) it assumes the profit margin to be identical across all products
C) it attempts to approximate the sales values at splitoff by subtracting from final selling prices the separable costs incurred after the splitoff point
D) it 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. This approach could result in incorrect cost allocations to each product, and thus it is a drawback of this method. The other options do not correctly describe the drawback of this method.

Quiz 16: Cost Allocation: Joint Products and Byproducts

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 splitoff b.estimated net realizable value method c.the constant gross margin method d.a physical measure such as volume

In joint costing,the sales value at splitoff method is used frequently ________.

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 splitoff.

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.

In joint costing,the ________ assumes that all the markup is attributable to the joint process costs.

When the selling prices of all products at the splitoff 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 splitoff method.Why?

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

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

In process costing,the sales value at splitoff method does not require information on the processing steps after the splitoff.

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

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