Question 1

Which of the following statements is true of the production method of accounting for byproducts?

Accepted Answer

A)  It makes no journal entries until the byproduct is sold. 
B)  It is the preferred method because of the matching principle. 
C)  It records revenues of the byproduct in the income statement as revenue. 
D)  It adds revenues of the byproduct to the cost of goods sold in the income statement. 
A)  It makes no journal entries until the byproduct is sold. 
B)  It is the preferred method because of the matching principle. 
C)  It records revenues of the byproduct in the income statement as revenue. 
D)  It adds revenues of the byproduct to the cost of goods sold in the income statement.

Question 2

Torid Company processes 18,175 gallons of direct materials to produce two products, Product X and Product Y. Product X sells for $6 per gallon and Product Y, the main product, sells for $190 per gallon. The following information is for December:
 
The manufacturing costs totalled $29,000.
If the byproduct inventory is recorded at NRV less profit margin of 40%, the balance sheet will report ________ of byproduct inventory.

Accepted Answer

A)  $900 
B)  $0 
C)  $3800 
D)  $540 
A)  $900 
B)  $0 
C)  $3800 
D)  $540

Question 3

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

A) True 
 B)False

Question 4

Which if the following is a negative consequence of recording byproducts in the accounting records when the sale occurs?

Accepted Answer

A)  the revenue from the byproducts is usually fairly large and the accounting records will be distorted 
B)  earnings cannot be timed under this method 
C)  managers can be tempted to stockpile byproducts 
D)  it involves complex calculations compared to the production method 
A)  the revenue from the byproducts is usually fairly large and the accounting records will be distorted 
B)  earnings cannot be timed under this method 
C)  managers can be tempted to stockpile byproducts 
D)  it involves complex calculations compared to the production method

Question 5

Beverage Drink Company processes direct materials up to the split-off point where two products, A and B, are obtained. The following information was collected for the month of July:
 
The cost of purchasing 3000 liters of direct materials and processing it up to the split-off point to yield a total of 2550 liters of good products was $7500. There were no inventory balances of A and B.
Product A may be processed further to yield 500 liters of Product Z5 for an additional processing cost of $170. Product Z5 is sold for $25 per liter. There was no beginning inventory and ending inventory was 125 liters.
Product B may be processed further to yield 1875 liters of Product W3 for an additional processing cost of $325. Product W3 is sold for $35 per liter. There was no beginning inventory and ending inventory was 25 liters.
If Product Z5 and Product W3 are produced, what are the expected sales values of production, respectively?

Accepted Answer

A)  $65,625 and $12,500 
B)  $21,000 and $58,500 
C)  $17,500 and $46,875 
D)  $12,500 and $65,625 
A)  $65,625 and $12,500 
B)  $21,000 and $58,500 
C)  $17,500 and $46,875 
D)  $12,500 and $65,625

Question 6

All products yielded from joint product processing have some positive value to the firm.

Accepted Answer

A) True 
 B)False

Question 7

What revenue or expense amounts are necessary to make a sell-or-process-further decision and why? What items are irrelevant to the decision and why?

Accepted Answer

The revenues and expenses that occur aft

Question 8

The Berkel Corporation manufactures Widgets, Gizmos, and Turnbols from a joint process. June production is 7000 widgets; 10,500 gizmos; and 12,500 turnbols. Respective per unit selling prices at split-off are $80, $55, and $30. Joint costs up to the split-off point are $188,500. If joint costs are allocated based upon the sales value at split-off, what amount of joint costs will be allocated to the widgets? (Do not round any intermediary calculations.)

Accepted Answer

A)  $23,492 
B)  $69,792 
C)  $46,736 
D)  $71,973 
A)  $23,492 
B)  $69,792 
C)  $46,736 
D)  $71,973

Question 9

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

Recommendations might include, among oth

Question 10

Which of the following formulas would calculate the net realizable value of a product?

Accepted Answer

A)  sales value at the split-off point less cost to produce up to the split-off point 
B)  sales value x constant gross-margin 
C)  final sales value minus cost of goods sold 
D)  final sales value minus separable costs 
A)  sales value at the split-off point less cost to produce up to the split-off point 
B)  sales value x constant gross-margin 
C)  final sales value minus cost of goods sold 
D)  final sales value minus separable costs

Question 11

Which of the following journal entries can happen only under the production method of recording byproducts?

Accepted Answer

A)  Work in Process Finished Goods - Byproduct
Accounts Payable 
B)  Cash or Accounts Receivable Revenues - Main product 
C)  Byproduct Inventory Finished Goods - Main product
Work in Process 
D)  Cash or Accounts Receivable Revenues - Byproduct 
A)  Work in Process Finished Goods - Byproduct
Accounts Payable 
B)  Cash or Accounts Receivable Revenues - Main product 
C)  Byproduct Inventory Finished Goods - Main product
Work in Process 
D)  Cash or Accounts Receivable Revenues - Byproduct

Question 12

Define the terms main product, joint product, and byproduct. Give at least one example of each type of product.

Accepted Answer

Main product - When one product has a hi

Question 13

Torid Company processes 18,025 gallons of direct materials to produce two products, Product X and Product Y. Product X sells for $5 per gallon and Product Y, the main product, sells for $170 per gallon. The following information is for December:
 
The manufacturing costs totalled $26,000.
Under production method, Product X NRV would be offset against the costs of Product Y by how much?

Accepted Answer

A)  $28,500 
B)  $29,000 
C)  $17,000 
D)  $500 
A)  $28,500 
B)  $29,000 
C)  $17,000 
D)  $500

Question 14

Which of the following factors would NOT be one of the reasons why the sales value at the split-off would be used to allocate joint costs?

Accepted Answer

A)  the sales value method is a good measure of benefits received 
B)  it helps determine manager compensation and performance evaluation 
C)  it is a method that is independent of further processing decisions 
D)  it provides a common allocation basis 
A)  the sales value method is a good measure of benefits received 
B)  it helps determine manager compensation and performance evaluation 
C)  it is a method that is independent of further processing decisions 
D)  it provides a common allocation basis

Question 15

Which of the following statements is true of sell-or-process-further decisions in joint costing?

Accepted Answer

A)  Joint costs incurred before the split-off point are relevant in deciding whether to process the product further. 
B)  All separable costs in joint-cost allocations are incremental costs. 
C)  Separable costs incurred before the split-off point are irrelevant in deciding whether to process the product further. 
D)  Costs that differ between the alternatives of selling products or processing further are relevant. 
A)  Joint costs incurred before the split-off point are relevant in deciding whether to process the product further. 
B)  All separable costs in joint-cost allocations are incremental costs. 
C)  Separable costs incurred before the split-off point are irrelevant in deciding whether to process the product further. 
D)  Costs that differ between the alternatives of selling products or processing further are relevant.

Question 16

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

A) True 
 B)False

Question 17

Bismite Corporation purchases trees from Cheney lumber and processes them up to the split-off point where two products (paper and pencil casings) emerge. The products are then sold to an independent company that markets and distributes them to retail outlets. The following information was collected for the month of October:
 
The cost of purchasing 350 trees and processing them up to the split-off point to yield 150,000 sheets of paper and 150,000 pencil casings is $15,500.
Bismite's accounting department reported no beginning inventory.
If the sales value at split-off method is used, what is the approximate production cost for each paper sheet? (Round intermediary percentages to the nearest hundredth.)

Accepted Answer

A)  $0.043 
B)  $0.065 
C)  $0.041 
D)  $0.062 
A)  $0.043 
B)  $0.065 
C)  $0.041 
D)  $0.062

Question 18

Joint costs are the costs of a production process that yields multiple products simultaneously.

Accepted Answer

A) True 
 B)False

Question 19

One of the reasons to allocate joint costs to individual products is to have costs reimbursed under a federal cost=plus contract.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following would explain why a company might need to follow very stringent rules that specify the way in which joint costs are assigned to products?

Accepted Answer

A)  to satisfy a federal contract reimbursement stipulations 
B)  So that cost of goods sold is accurate for income tax purposes 
C)  to satisfy FASB 
D)  to increase market share 
A)  to satisfy a federal contract reimbursement stipulations 
B)  So that cost of goods sold is accurate for income tax purposes 
C)  to satisfy FASB 
D)  to increase market share

Which of the following statements is true of the production method of accounting for byproducts?

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.

Which if the following is a negative consequence of recording byproducts in the accounting records when the sale occurs?

All products yielded from joint product processing have some positive value to the firm.

What revenue or expense amounts are necessary to make a sell-or-process-further decision and why? What items are irrelevant to the decision and why?

Which of the following formulas would calculate the net realizable value of a product?

Which of the following journal entries can happen only under the production method of recording byproducts?

Define the terms main product, joint product, and byproduct. Give at least one example of each type of product.

Which of the following factors would NOT be one of the reasons why the sales value at the split-off would be used to allocate joint costs?

Which of the following statements is true of sell-or-process-further decisions in joint costing?

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.

Joint costs are the costs of a production process that yields multiple products simultaneously.

One of the reasons to allocate joint costs to individual products is to have costs reimbursed under a federal cost=plus contract.

Which of the following would explain why a company might need to follow very stringent rules that specify the way in which joint costs are assigned to products?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

Exam 16: Cost Allocation: Joint Products and Byproducts

Which of the following statements is true of the production method of accounting for byproducts?

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.

Which if the following is a negative consequence of recording byproducts in the accounting records when the sale occurs?

All products yielded from joint product processing have some positive value to the firm.

What revenue or expense amounts are necessary to make a sell-or-process-further decision and why? What items are irrelevant to the decision and why?

Which of the following formulas would calculate the net realizable value of a product?

Which of the following journal entries can happen only under the production method of recording byproducts?

Define the terms main product, joint product, and byproduct. Give at least one example of each type of product.

Which of the following factors would NOT be one of the reasons why the sales value at the split-off would be used to allocate joint costs?

Which of the following statements is true of sell-or-process-further decisions in joint costing?

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.

Joint costs are the costs of a production process that yields multiple products simultaneously.

One of the reasons to allocate joint costs to individual products is to have costs reimbursed under a federal cost=plus contract.

Which of the following would explain why a company might need to follow very stringent rules that specify the way in which joint costs are assigned to products?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters