Exam 7: Cost Allocation: Departments, Joint Products, and By-Products

Which one of the following methods of allocating joint costs allocates joint costs to joint products on the basis of estimated sales values at the split-off point?

The reciprocal method can be solved using the Excel function:

The amount of joint costs allocated to product DBB-1 using the physical measure method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

Which of the following is an example of a physical measure used in the physical measure method?

Johns Company manufactures products R, S, and T from a joint process. The following information is available: Assuming that joint product costs are allocated using the relative-sales-value at split-off approach, what was the sales value at split-off for products R and S?

Princess Corporation grows, processes, packages, and sells three apple products: slices that are used in frozen pies, applesauce, and apple juice. The outside skin of the apple, which is removed in the cutting department and processed as animal feed, is treated as a by-product. Princess uses the net realizable value method to assign costs of the joint process to its main products. The apple skin by-product net realizable value is used to reduce the joint production costs prior to allocation to the main products. Details of Princess' production process follow: • The cutting department washes the apples and removes the outside skin. The department then cores and trims the apples for slicing. At this point, each of the three main products and the by-product are recognizable. Each product is then transferred to the next department for final processing. • The slicing department receives the trimmed apples and slices and freezes them. Any juice generated during the slicing operation is frozen with the slices. • The crushing department trims pieces of apple and processes them into applesauce. The juice generated during this operation is used in the applesauce. • The juicing department pulverizes the core and any surplus apple from the cutting department into a liquid. This department experiences a loss equal to 8 percent of the weight of the good output produced. • The feed department chops the outside skin into animal food and packages it. A total of 270,000 pounds of apples entered the cutting department during November. The following information shows the costs incurred in each department, the proportion by weight (based on pounds) transferred to the four final processing departments, and the selling price of each end product. Assume no beginning or ending inventory of apple slices, applesauce, or juice. Required: 1. Princess Corporation uses the net realizable value method to determine inventory values for its main products and by-products. For the month of November, calculate each of the following: a. Output in pounds for apple slices, applesauce, apple juice, and animal feed. b. Net realizable value at the split-off point for each of the three main products. c. Cutting department cost assigned to each of the three main products and to the by-product in accordance with corporate policy. d. Gross margin in dollars for each of the three main products. 2. Comment on the significance to management of the gross margin dollar information by main product for planning and control purposes as opposed to inventory valuation. 3. List the important issues that Princess faces as a global company. What are its critical success factors? Which key issues arise because Princess operates in several countries? Should any of these issues affect the way Princess allocates costs, as determined in requirement 1?

For the purposes of cost accumulation, which of the following are identifiable as different individual products before the split-off point?

The total cost accumulated in the sales department using the direct method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

The amount of joint costs allocated to product L using the physical measure method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

The total cost accumulated in the finishing department using the direct method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

The amount of joint costs allocated to product Y using the sales value at split-off method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

The amount of joint costs allocated to product Y using the physical measure method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

The total cost accumulated in the marketing department using the direct method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

The total cost accumulated in the assembly department using the step method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

The point in a joint production process at which individual products can be identified for the first time is called the:

Which of the following statements best describes a by-product?

The following data on overhead apply to the Acme Manufacturing Company that manufactures frames for large trucks in three production departments (J-122, J-123, and J-125). There are two service departments, the Human Resources Department and the Facilities Department. *Allocated on the basis of hours of usage in the HR department. **Allocated on the basis of floor space. Required: Using hours as the application base for the Human Resources Department and square feet of floor space for the Facilities Department, apply overhead from these service departments to the production departments, using the following two methods. Calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar. (1) Direct method. (2) Step method (assume the human resources department is allocated first).

The amount of joint costs allocated to product DBB-3 using the sales value at split-off method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

The amount of joint costs allocated to product L using the net realizable value method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

The amount of joint costs allocated to product DBB-2 using the physical measure method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):