Exam 11: Allocation of Joint Costs and Accounting for By-Products

Sales revenue at split-off less disposal costs equals ______.

Allocating joint costs based upon a physical measure ignores the revenue-generating ability of individual products.

Under the net realizable value approach,no value is recognized for by-products or scrap until they are actually sold.

Ryan Company Ryan Company manufactures products X and Y from a joint process that also yields a by-product,Z.Revenue from sales of Z is treated as a reduction of joint costs.Additional information is as follows:

		Products
	X	Y	Z	Total
Units produced	20,000	20,000	10,000	50,000
Joint costs	?	?	?	$262,000
Sales value at
split-off	$300,000	$150,000	$10,000	$460,000

Joint costs were allocated using the sales value at split-off approach. Refer to Ryan Company.The joint costs allocated to product X were

Joint costs may be allocated to by-products as well as primary products.

Not-for-profit organizations are required by the ____ to allocate joint costs.

Ardmore Company produces two main products jointly, A and B, and C, which is a by-product of B. A and B are produced from the same raw material. C is manufactured from the residue of the process creating B. Costs before separation are apportioned between the two main products by the net realizable value method. The net revenue realized from the sale of C is deducted from the cost of B. Data for April were as follows:

Costs before separation	$200,000
Costs after separation:
A	50,000
B	32,000
C	4,000
Production for April, in pounds:
A	800,000
B	200,000
C	20,000
Sales for April:
A	640,000 pounds @ $.4375
B	180,000 pounds @ .65
C	20,000 pounds @ .30

Required: Determine the gross profit for April.

Knight Corporation manufactures three identifiable product lines,Products A,B,and C,from a basic processing operation.The cost of the basic operation is $320,000 for a yield of 5,000 tons of Product A;2,000 tons of Product B;and 1,000 tons of Product C.The basic processing cost is allocated to the product lines in proportion to the relative weight produced. Knight Corporation does both the basic processing work and the further refinement of the three product lines.After the basic operation,the products can be sold at the following prices per metric ton: Product A-$60 Product B-$53 Product C-$35 Costs to refine each of the three product lines follow:                                                                   $\text {\underline{ Product Lines} }$ Variable cost per metric ton Total fixed cost \ 8 \ 7.000 \ 60000 The fixed cost of the refining operation will not be incurred if the product line is not refined. The refined products can be sold at the following prices per metric ton: Product A-$75 Product B-$65 Product C-$40 Required: a.Determine the total wit cost of each product line in a refined state. b. Which of the three prochuct lines, if any, should be refined and which should be sold after the basic processing operation? Show computations.

The primary distinction between by-products and scrap is the difference in sales value.

Shiny Floors Company Shiny Floors Company produces four floor cleaners from the same process: C,D,E,and G.Joint product costs are $9,000.(Round all answers to the nearest dollar. )

	Barrels	Sales price per barrel at split-off	Disposal cost per barrel at split-off	Further processing costs	Final sales price per barrel
C	750	$10.00	$6.50	$2.00	$13.50
D	1,000	8.00	4.00	2.50	10.00
E	1,400	11.00	7.00	4.00	15.50
G	2,000	15.00	9.50	4.50	19.50

If Shiny Floors sells the products after further processing,the following disposal costs will be incurred: C,$2.50;D,$1.00;E,$3.50;G,$6.00. Refer to Shiny Floors Company.Using sales value at split-off,what amount of joint processing cost is allocated to Product E?

Lamar Company Lamar Company produces only two products and incurs joint processing costs that total $3,750.Products Alpha and Beta are produced in the following quantities during each month: 4,500 and 6,000 gallons,respectively.Lamar Company also runs one ad each month that advertises both products at a cost of $1,500.The selling price per gallon for the two products are $20 and $17.50,respectively. Refer to Lamar Company.What amount of joint processing costs is allocated to each product based on gallons produced?

In a joint costing process,which of the following would not be considered a sunk cost?

Moore Company Moore Company produces three products from the same process and incurs joint processing costs of $3,000.

	Gallons	Sales price per gallon at split-off	Disposal cost per gallon at split-off	Further processing costs	Final sales price per gallon
M	2,300	$ 4.50	$1.25	$1.00	$ 7.00
N	1,100	6.00	3.00	2.00	10.00
Q	500	10.00	8.00	2.00	15.00

Disposal costs for the products if they are processed further are: M,$3.00;N,$5.50;Q,$1.00. Refer to Moore Company.What amount of joint processing cost is allocated to the three products using net realizable value at split-off?

Monetary allocation measures recognize the revenue generating ability of each product in a joint process.

Which of the following components of production are allocable as joint costs when a single manufacturing process produces several salable products?

Joint costs occur after the split-off point in a production process.

Chambers Company Chambers Company produces two products from a joint process: X and Z.Joint processing costs for this production cycle are $8,000.

	Yards	Sales price per yard at split-off	Disposal cost per yard at split-off	Further processing per yard	Final sale price per yard
X	1,500	$6.00	$3.50	$1.00	$ 7.50
Y	2,200	9.00	5.00	3.00	11.25

If X and Z are processed further,no disposal costs will be incurred or such costs will be borne by the buyer. Refer to Chambers Company.Using sales value at split-off,what amount of joint processing cost is allocated to Product X (round to the nearest dollar)?

Shiny Floors Company Shiny Floors Company produces four floor cleaners from the same process: C,D,E,and G.Joint product costs are $9,000.(Round all answers to the nearest dollar. )

	Barrels	Sales price per barrel at split-off	Disposal cost per barrel at split-off	Further processing costs	Final sales price per barrel
C	750	$10.00	$6.50	$2.00	$13.50
D	1,000	8.00	4.00	2.50	10.00
E	1,400	11.00	7.00	4.00	15.50
G	2,000	15.00	9.50	4.50	19.50

If Shiny Floors sells the products after further processing,the following disposal costs will be incurred: C,$2.50;D,$1.00;E,$3.50;G,$6.00. Refer to Shiny Floors Company.Using a physical measurement method,what amount of joint processing cost is allocated to Product E?

Moore Company Moore Company produces three products from the same process and incurs joint processing costs of $3,000.

	Gallons	Sales price per gallon at split-off	Disposal cost per gallon at split-off	Further processing costs	Final sales price per gallon
M	2,300	$ 4.50	$1.25	$1.00	$ 7.00
N	1,100	6.00	3.00	2.00	10.00
Q	500	10.00	8.00	2.00	15.00

Disposal costs for the products if they are processed further are: M,$3.00;N,$5.50;Q,$1.00. Refer to Moore Company.What amount of joint processing cost is allocated to the three products using sales value at split-off?

Two incidental products of a joint process are __________ and ___________.