Exam 16: Cost Allocation: Joint Products and Byproducts

List the reasons that the sales value at split-off method of joint cost allocation should be used.

The Green Company processes unprocessed goat milk up to the split-off point where two products, condensed goat milk and skim goat milk result. The following information was collected for the month of October: The costs of purchasing the of unprocessed goat milk and processing it up to the split-off point to yield a total of 102,000 gallons of saleable product was $188,480. There were no inventory balances of either product. Condensed goat milk may be processed further to yield 42,000 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $4 per usable gallon. Xyla can be sold for $20 per gallon. Skim goat milk can be processed further to yield 58,200 gallons of skim goat ice cream, for an additional processing cost per usable gallon of $4. The product can be sold for $12 per gallon. There are no beginning and ending inventory balances. What is the estimated net realizable value of the skim goat ice cream at the split-off point?

If the value of a byproduct drops significantly, it could also be viewed as a joint product.

When a single manufacturing process yields two products, one of which has a relatively high sales value compared to the other, the two products are respectively known as ________.

The constant gross-margin percentage NRV method of joint cost allocation ________.

When a joint production process yields one product with a high total sales value compared to the total sales value of the other products of the process, that product is called a joint product.

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?

The Alfarm Corporation processes raw milk up to the split-off point where two products, cream and liquid skim, are produced and sold. There was no beginning inventory. The following material was collected for the month of February: The cost of purchasing 760,000 gallons of direct materials and processing it up to the split-off point to yield a total of 738,000 gallons of good product was $2,350,000. When using the physical-volume method, what is Cream's approximate production cost per gallon? (Round intermediary percentages to the nearest hundredth.)

The Kenton 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:22,500 gallons (after shrinkage) The cost of purchasing the of unprocessed milk and processing it up to the split-off point to yield a total of 22,500 gallons of saleable product was $51,000. 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? (Round intermediary percentages to the nearest hundredth.)

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

Torid Company processes 18,700 gallons of direct materials to produce two products, Product X and Product Y. Product X sells for $10 per gallon and Product Y, the main product, sells for $150 per gallon. The following information is for December: The manufacturing costs totalled $30,000. How much is the ending inventory for the byproduct if byproducts are recognized in the general ledger at the point of sale?

Which of the following is false regarding net realizable value (NRV)?

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

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.

The constant gross-margin percentage method differs from market-based joint-cost allocation method (sales value at split-off and estimated net realizable value) since no account is taken of profits earned before or after the split-off point when allocating joint costs.

All separable costs in joint-cost allocations are always incremental costs.

Before the split-off point, decisions relating to the sale or further processing of each identifiable product cannot be made independently of decisions about the other products.

Classification of main products, joint products, and byproducts can always be done with ease.

Netzone Company is in semiconductor industry and fabrication of silicon-wafer chips splits off two types of memory chips, Standard and Premium. The following information was collected for last quarter of the calendar year: The cost of purchasing 300 kgs of direct materials and processing it up to the split-off point to yield a total of 18,800 chips of good products was $2,030,000. Beginning inventories totalled 150 chips for Standard and 80 chips for Premium. Ending inventory amounts reflected 150 chips of Standard and 80 chips of Premium. October costs per unit were the same as November. When using a physical-volume measure, what is the approximate amount of joint costs that will be allocated Premium chips? (Round intermediary percentages to the nearest hundredth.)

Chem Manufacturing Company processes direct materials up to the split-off point where two products (X and Y) are obtained and sold. The following information was collected for the month of November: Direct materials processed:10,200 gallons (10,200 gallons yield 9500 gallons of good product and 700 gallons of shrinkage) The cost of purchasing 10,200 gallons of direct materials and processing it up to the split-off point to yield a total of 9500 gallons of good products was $1,050,000. The beginning inventories totaled 35 gallons for X and 400 gallons for Y. Ending inventory amounts reflected 565 gallons of Product X and 1,515,000 gallons of Product Y. October costs per unit were the same as November. Using the physical-volume method, what is Product X's approximate gross-margin percentage? (Round all intermediary calculations two decimal places.)