Use the following information for the next 8 questions.
HGT Corporation produces four products from a common production process. Selected data from HGT's accounting system for the four products appears below: Joint costs for the accounting period totaled $5,000. Each product line has a different product manager, who is evaluated based on product line profitability. Therefore, each manager is motivated to reduce his / her total product line costs as much as possible. The managers have been given information about potential joint cost allocations using the following three methods: physical output, sales at split-off point, and net realizable value. The managers are comparing the joint cost allocations under each method so that they can give the accountant input about their preferred method(s).
-Joint cost allocations are inappropriate when I. Deciding whether to process a product beyond the split-off point
II. Preparing external financial reports
III. Evaluating the performance of individual project managers
A) I and II only
B) I and III only
C) II and III only
D) I, II, and III

Question

Use the following information for the next 8 questions.
HGT Corporation produces four products from a common production process. Selected data from HGT's accounting system for the four products appears below:  Joint costs for the accounting period totaled $5,000. Each product line has a different product manager, who is evaluated based on product line profitability. Therefore, each manager is motivated to reduce his / her total product line costs as much as possible. The managers have been given information about potential joint cost allocations using the following three methods: physical output, sales at split-off point, and net realizable value. The managers are comparing the joint cost allocations under each method so that they can give the accountant input about their preferred method(s).
-Joint cost allocations are inappropriate when I. Deciding whether to process a product beyond the split-off point
II. Preparing external financial reports
III. Evaluating the performance of individual project managers
A) I and II only 
B) I and III only 
C) II and III only 
D) I, II, and III

Quizplus · Accepted Answer

Joint cost allocations are inappropriate for decision-making purposes like deciding whether to process further (I) and evaluating performance (III) because they do not reflect the incremental costs and benefits of such decisions. However, they are used in external financial reporting (II) to allocate costs to products.

Use the Following Information for the Next 8 Questions