Exam 15: Cost Allocation: Joint Products and Byproducts

Recognition of byproducts in the financial statements at the time of sale usually occurs when the dollar amounts of the byproducts are immaterial.

Match each of the following costs with the appropriate joint production process cost classification. A)scrap B)joint product C)byproduct D)main product -Salt from a salt works process

Byproduct revenues appear in the income statement as a cost increase to the main product and as a separate item of expense.

Cando Company processes 40,000 litres of direct materials to produce two products, Bilgot and Camdee.Bilgot, a byproduct, sells for $9 per litre, and Camdee, the main product, sells for $50 per litre.The following information is for July: The manufacturing costs totalled $260,000; beginning inventory $3,200.Required: 1.Prepare a July income statement assuming that Helen Company recognizes the byproduct revenue at the time of sale.The company uses FIFO for the inventory flow assumption.2.Prepare the journal entry to record the byproduct sales.

Use the information below to answer the following question(s).Chem Manufacturing Company processes direct materials up to the splitoff point, where two products (X and Y)are obtained and sold.The following information was collected for the month of November.Direct materials processed: 10,000 litres (10,000 litres yield 9,500 litres of good product and 500 litres of shrinkage) The cost of purchasing 10,000 litres of direct materials and processing it up to the splitoff point to yield a total of 9,500 litres of good products was $975,000.The beginning inventories totalled 50 litres for X and 25 litres for Y.Ending inventory amounts reflected 300 litres of product X and 525 litres of product Y.October costs were per unit were the same as November. -The Arvid Corporation manufactures widgets, gizmos, and turnbols from a joint process.May production is 4,000 widgets; 7,000 gizmos; and 8,000 turnbols.Respective per unit selling prices at splitoff are $15, $10, and $5.Joint costs up to the splitoff point are $75,000.If joint costs are allocated based upon the sales value at splitoff, what amount of joint costs will be allocated to the widgets?

Joint costs are incurred beyond the splitoff point and are assignable to individual products.

Use the information below to answer the following question(s).Chem Manufacturing Company processes direct materials up to the splitoff point, where two products (X and Y)are obtained and sold.The following information was collected for the month of November.Direct materials processed: 10,000 litres (10,000 litres yield 9,500 litres of good product and 500 litres of shrinkage) The cost of purchasing 10,000 litres of direct materials and processing it up to the splitoff point to yield a total of 9,500 litres of good products was $975,000.The beginning inventories totalled 50 litres for X and 25 litres for Y.Ending inventory amounts reflected 300 litres of product X and 525 litres of product Y.October costs were per unit were the same as November. -In rate regulation settings, which method is usually preferred over the sales value method?

Match each of the following costs with the appropriate joint production process cost classification. A)separable cost B)joint cost -Cost of processing timber (trees)at a sawmill.

BC Lumber Company prepares lumber for companies who manufacture furniture.The main product is finished lumber with a byproduct of wood shavings.The byproduct is sold to plywood manufacturers.For July, the manufacturing process incurred $332,000 in total costs.Eighty thousand board feet of lumber were produced and sold along with 6,800 pounds of shavings.The finished lumber sold for $6.00 per board foot and the shavings sold for $0.60 a pound.There were no beginning or ending inventories.Required: Prepare an income statement showing the byproduct (1)as a cost reduction during production, and (2)as a revenue item when sold.

The amount of the joint costs is an important factor when considering to sell a product at the splitoff point or process it further.

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

Use the information below to answer the following question(s).Cranbrook Chemical Ltd.manufactures two industrial compounds.In the month of May, 15,000 litres of direct material costing $160,000 were processed at a cost of $400,000.The joint process yielded 16,000 containers of a compound known as Jarlon and 4,000 containers of a compound known as Kharton.The respective selling prices of Jarlon and Kharton are $38 and $58.Both products may be processed further.Jarlon may be processed into Jaxton at an incremental cost of $8 per jar of the final product while Kharton may be processed into Kraxton at an additional cost of $32 per jar of the final product.The volume of jars of the final product are: 12,000 and 3,000 for Jaxton and Kraxton respectively.The selling price of Jaxton is $48 per jar.The selling price of Kraxton is $102 per jar. -Using the NRV method, the amount of joint costs allocated to Kraxton is

Match each of the following costs with the appropriate joint production process cost classification. A)scrap B)joint product C)byproduct D)main product -Fuel oil from petroleum processing

Match each of the following costs with the appropriate joint production process cost classification. A)scrap B)joint product C)byproduct D)main product -Broth from cooking food

Match each of the following costs with the appropriate joint production process cost classification. A)scrap B)joint product C)byproduct D)main product -Sawdust from a sawmill

Use the information below to answer the following question(s).Cranbrook Chemical Ltd.manufactures two industrial compounds.In the month of May, 15,000 litres of direct material costing $160,000 were processed at a cost of $400,000.The joint process yielded 16,000 containers of a compound known as Jarlon and 4,000 containers of a compound known as Kharton.The respective selling prices of Jarlon and Kharton are $38 and $58.Both products may be processed further.Jarlon may be processed into Jaxton at an incremental cost of $8 per jar of the final product while Kharton may be processed into Kraxton at an additional cost of $32 per jar of the final product.The volume of jars of the final product are: 12,000 and 3,000 for Jaxton and Kraxton respectively.The selling price of Jaxton is $48 per jar.The selling price of Kraxton is $102 per jar. -Using the physical measures method, the joint costs allocated to Jarlon would be

Purple Paper Company processes wood pulp into two products.During July the joint costs of processing were $50,000.Production and sales value information for the month were as follows: Paper sells for $2.71 a kilogram and cardboard sells for $3.10 a kilogram.There were no beginning or ending inventories for July.Required: 1.Determine the amounts to be allocated to each product using the:

Answer the following questions using the information below: Yakima Manufacturing purchases trees from Cheney Lumber and processes them up to the splitoff point where two products (paper and pencil casings)are obtained.The products are then sold to an independent company that markets and distributes them to retail outlets.The following information was collected for the month of November: The cost of purchasing 100 trees and processing them up to the splitoff point to yield 60,000 sheets of paper and 60,000 pencil casings is $3,000.Yakima's accounting department reported no beginning inventories and an ending inventory of 2,000 sheets of paper. -If the sales value at splitoff method is used, what are the approximate joint costs assigned to ending inventory for paper?

Match each of the following costs with the appropriate joint production process cost classification. A)separable cost B)joint cost -Cost of processing water into different sized bottles for human consumption.

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