Exam 15: Cost Allocation: Joint Products and Byproducts

Under the benefits-received criterion, the physical measures method is less desirable that the sales value at splitoff method.

Calamata Corporation processes a single material into three separate products A, B, and C.During September, the joint costs of processing were $300,000.Production and sales value information for the month were as follows: Required: Determine the amount of joint cost allocated to each product if the constant gross margin percentage of NRV method is used.

A major deficiency of the sales value at splitoff method is that this method does not allow management to obtain individual product costs and gross margin information.

The juncture in a joint production process when two products become separable is the byproduct point.

Explain the difference between a joint product and a byproduct.Can a byproduct ever become a joint product?

Use the information below to answer the following question(s).Troy Company processes 15,000 litres of direct materials to produce two products, Product X and Product Y.Product X, a byproduct, sells for $4 per litre, and Product Y, the main product, sells for $50 per litre.The following information is for August: The manufacturing costs totalled $95,000. -How much is the ending inventory reduction for the byproduct if byproducts are recognized in the general ledger at the point of sale?

Match each of the following costs with the appropriate joint production process cost classification. A)separable cost B)joint cost -Cost of processing lumber into different lengths and sizes at a sawmill.

Which of the following is TRUE regarding the costs of toxic waste disposal, reclamation, and remediation that result from joint production processing?

Land and Sea Corporation processes frozen chicken.The company has not been pleased with its profit margin per product because it appears that the high value items have too few costs assigned to them while the low value items have too many costs assigned to them.The processing results in several products, the primary one of which is frozen small hens.Other products include frozen parts such as wings and legs, byproducts such as skin and bones, and unused scrap items.Required: What may be the cost assignment problem if a key consideration is the value of the products being sold?

North York Statue Company makes miniature Mountie statues from cast iron.Sales total 40,000 units a year and the company is operating at full capacity.The statues are finished either rough or polished, with an average demand of 60 percent rough and 40 percent polished.Iron ingots, the direct material, costs $6 per kilogram.Processing costs are $200 to convert 20 kilograms into 40 statues; polishing adds $3 per statue.Rough statues are sold for $15 each and polished statues can be sold for $18 or engraved for an additional cost of $5.Engraved statues can then be sold for $30.Required: Determine if the engraving process is cost effective.

CSI 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 were as follows: Required: Determine the amount of joint cost allocated to each product if the sales value at splitoff method is used.

The production method of accounting for byproducts recognizes byproducts in the financial statements at the time when production is completed.

There are no logical reasons for allocating joint costs.

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. -The incremental benefit or (loss)of processing Kharton into Kraxton is

AllCanada Wire Products processes copper into wire.It makes 12 gauge and 14 gauge wire.During April the joint costs of processing the aluminium were $365,000.There were no beginning or ending inventories for the month.Production and sales value information for the month were as follows: Required: Determine the amount of joint costs allocated to each product if the constant gross margin percentage of NRV method is used.

Which of the following statements is TRUE in regard to the cause-and-effect relationship between allocated joint costs and individual products?

Wharf Fisheries processes many of its seafood items to the demands of its largest customers, most of which are large retail distributors.To keep the accounting system simple it has always assigned cost by the weight of the finished product.However, with increased competition it has had to watch its prices closely and in recent years several items have incurred zero profit margins.After several weeks of investigation, your consulting firm has found that while weight is important in processing of seafood, numerous items have very distinct processing steps and some items are processed through more steps than others.Required: Based on the findings of your consulting firm, what changes might you recommend to the company in the way of cost allocation among its products?

Helen Company processes 30,000 litres of direct materials to produce two products, Zander and Ifso.Zander, a byproduct, sells for $5 per litre, and Ifso, the main product, sells for $70 per litre.The following information is for July: The manufacturing costs totalled $145,000; beginning inventory $3,000.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.

Sweet Sugar Company processes sugar beets into three products.During April the joint costs of processing were $240,000.Production and sales value information for the month were as follows: Sales Value at Required: Determine the amount of joint cost allocated to each product if the sales value at splitoff method is 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 Jaxton is