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

The Insurance Plus Company has two service departments - actuarial and premium rating,and two production departments - marketing and sales.The distribution of each service department's efforts to the other departments is shown below: The direct operating costs of the departments (including both variable and fixed costs)were as follows: Actuarial $50,000.Premium Rating $40,000.Marketing $60,000.Sales $70,000.The total cost accumulated in the sales 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):

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?

Marin Products produces three products - DBB-1,DBB-2,and DBB-3 from a joint process.Each product may be sold at the split-off point or processed further.Additional processing requires no special facilities,and production costs of further processing are entirely variable and traceable to the products involved.Key information about Marin's production,sales,and costs follows. 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 4 decimal places,for example 33.3333%,and round all dollar amounts to the nearest whole dollar):

The Sakicki Manufacturing Company has two service departments - purchasing and maintenance,and two production departments - fabrication and assembly.The distribution of each service department's efforts to the other departments is shown below: The direct operating costs of the departments (including both variable and fixed costs)were as follows: Purchasing $96,000.Maintenance 18,000.Fabrication 72,000.Assembly 48,000.The total cost accumulated in the assembly 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):

Russell Co.produces three products - U,V,and W - from a joint process.Each product may be sold at the split-off point or processed further.Additional processing requires no special facilities,and production costs of further processing are entirely variable and traceable to the products involved.Last year all three products were processed beyond split-off.Joint production costs for the year were $70,000.Sales values and costs needed to evaluate Russell's production policy follow. The amount of joint costs allocated to product U 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):

Marin Products produces three products - DBB-1,DBB-2,and DBB-3 from a joint process.Each product may be sold at the split-off point or processed further.Additional processing requires no special facilities,and production costs of further processing are entirely variable and traceable to the products involved.Key information about Marin's production,sales,and costs follows. The amount of joint costs allocated to product DBB-2 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 direct method of departmental cost allocation ignores:

Marin Products produces three products - DBB-1,DBB-2,and DBB-3 from a joint process.Each product may be sold at the split-off point or processed further.Additional processing requires no special facilities,and production costs of further processing are entirely variable and traceable to the products involved.Key information about Marin's production,sales,and costs follows. The amount of joint costs allocated to product DBB-1 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):

Marin Products produces three products - DBB-1,DBB-2,and DBB-3 from a joint process.Each product may be sold at the split-off point or processed further.Additional processing requires no special facilities,and production costs of further processing are entirely variable and traceable to the products involved.Key information about Marin's production,sales,and costs follows. The amount of joint costs allocated to product DBB-3 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):

Beth Johnson was recently appointed Vice President of Administration in the Sigma Group,a nation-wide personal financial planning services firm.Ann Garber,department manager,has just finished reading the most recent memo from VP Johnson,which reads in part: In order to more efficiently apportion the costs of hard copy duplication,departments will be charged $0.075 per page for all duplicated materials.This new rate replaces the two-tier rate structures of $0.05 and $0.10 per page,and is effective as of the date of this memo.The two tier system was used to charge a higher rate for the more difficult jobs."What is she trying to do?" Ann asks."This new price will drive up my department's duplicating costs so much that we'll have to cut back on how much stuff we have duplicated." Required: a.What is the control advantage of any multi-tier pricing (costing)system versus a single price (cost)system? b.If the new price for duplication reduces total usage of duplicating services,are there any significant disadvantages to such a reduction in usage?

Russell Co.produces three products - U,V,and W - from a joint process.Each product may be sold at the split-off point or processed further.Additional processing requires no special facilities,and production costs of further processing are entirely variable and traceable to the products involved.Last year all three products were processed beyond split-off.Joint production costs for the year were $70,000.Sales values and costs needed to evaluate Russell's production policy follow. The amount of joint costs allocated to product U 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 most important reason cost allocation is an important strategic issue for U.S.manufacturing firms with foreign subsidiaries:

Which one of the following methods of allocating joint costs uses a measure of weight,size or number of units to allocate joint costs to joint products?

Hartwicke Manufacturing Company has two service departments - product design and engineering support,and two production departments - assembly and finishing.The distribution of each service department's efforts to the other departments is shown below: The direct operating costs of the departments (including both variable and fixed costs)were as follows: Design $120,000.Engineering Support $240,000.Assembly $660,000.Finishing $870,000.The total cost accumulated in the assembly department using the reciprocal 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):

Russell Co.produces three products - U,V,and W - from a joint process.Each product may be sold at the split-off point or processed further.Additional processing requires no special facilities,and production costs of further processing are entirely variable and traceable to the products involved.Last year all three products were processed beyond split-off.Joint production costs for the year were $70,000.Sales values and costs needed to evaluate Russell's production policy follow. The amount of joint costs allocated to product V 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):

Hartwicke Manufacturing Company has two service departments - product design and engineering support,and two production departments - assembly and finishing.The distribution of each service department's efforts to the other departments is shown below: The direct operating costs of the departments (including both variable and fixed costs)were as follows: Design $120,000;Engineering Support $240,000;Assembly $660,000;Finishing $870,000.The total cost accumulated in the finishing 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):

Taylor Inc.produces joint products A,B,and C from a joint process.Information concerning a batch produced in May at a joint cost of $110,000 was as follows:

The reciprocal method can be solved using the Excel function:

Hartwicke Manufacturing Company has two service departments - product design and engineering support,and two production departments - assembly and finishing.The distribution of each service department's efforts to the other departments is shown below: The direct operating costs of the departments (including both variable and fixed costs)were as follows: Design $120,000.Engineering Support $240,000.Assembly $660,000.Finishing $870,000.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):

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?