Exam 16: Cost Allocation: Joint Products and Byproducts

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 103,000 gallons of saleable product was $186,480. There were no inventory balances of either product. Condensed goat milk may be processed further to yield 44,500 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $7 per usable gallon. Xyla can be sold for $25 per gallon. Skim goat milk can be processed further to yield 56,700 gallons of skim goat ice cream, for an additional processing cost per usable gallon of $7. The product can be sold for $12 per gallon. There are no beginning and ending inventory balances. How much (if any) extra income would Green earn if it produced and sold skim milk ice cream from goats rather than goat skim milk? Allocate joint processing costs based upon the relative sales value at the split-off point. (Round intermediary percentages to the nearest hundredth.)

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

What are joint costs, separable costs, and a split-off point?

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

Torid Company processes 17,750 gallons of direct materials to produce two products, Product X and Product Y. Product X sells for $7 per gallon and Product Y, the main product, sells for $160 per gallon. The following information is for December: The manufacturing costs totalled $27,000. The production method will report Product X in the balance sheet at ________.

Byproducts are recognized in the general ledger either at the time production is completed or at the time of sale.

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:31,500 gallons The costs of purchasing the of unprocessed milk and processing it up to the split-off point to yield a total of 31,500 gallons of saleable product was $109,025. The company uses constant gross-margin percentage NRV method to allocate the joint costs of production. If separable costs of Butter Cream was $19,000 and constant gross margin was 30%, what would have been the total allocated joint costs of production?

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: Required: Determine the amount of joint cost allocated to each product if the physical-measure method is used.

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

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.

Which of the methods of allocating joint costs usually is considered the simplest to implement?

In each of the following industries, identify possible joint (or severable) products at the split-off point. a.Coal b.Petroleum c.Dairy d.Lamb e.Lumber f.Cocoa Beans g.Christmas Trees h.Salt i.Cowhide

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 100,500 gallons of saleable product was $191,480. 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 $6 per usable gallon. Xyla can be sold for $21 per gallon. Skim goat milk can be processed further to yield 56,700 gallons of skim goat ice cream, for an additional processing cost per usable gallon of $6. The product can be sold for $14 per gallon. There are no beginning and ending inventory balances. What is the estimated net realizable value of Xyla at the split-off point?

Which of the following is true of the physical-measure approach of allocating joint costs?

Joint costs are incurred beyond the split-off point and are assignable to individual products.

Cola 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 3500 liters of direct materials and processing it up to the split-off point to yield a total of 2975 liters of good products was $7000. There were no inventory balances of A and B. Product A may be processed further to yield 2000 liters of Product Z5 for an additional processing cost of $160. Product Z5 is sold for $60.00 per liter. There was no beginning inventory and ending inventory was 125 liters. Product B may be processed further to yield 800 liters of Product W3 for an additional processing cost of $290. Product W3 is sold for $65 per liter. There was no beginning inventory and ending inventory was 25 liters. What is Product Z5's estimated net realizable value at the split-off point?

Timber logs are processed into standard lumber used in home construction and wood chips that will be sold to landscapers. How would these products be classified?

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.

Which of the following is not true of the joint allocation methods?

Distinguish between the two principal methods of accounting for byproducts, the production byproduct method and the sale byproduct method. Briefly discuss the relative merits (or lack thereof) of each.