Exam 16: Cost Allocation: Joint Products and Byproducts

The products of a joint production process that have low total sales values compared with the total sales value of the main product or of joint products are called byproducts.

What are the two methods to account for byproducts. Which is the more appropriate method to use and why?

Oregon Lumber processes timber into four products. During January, the joint costs of processing were $280,000. There was no inventory at the beginning of the month. Production and sales value information for the month is as follows: Required: Determine the value of ending inventory if the sales value at splitoff method is used for product costing. Round to 3 decimal places when necessary.

The sales-value at splitoff method of joint cost allocation involves computation of the relative amounts of the sales value of the amount of each joint product sold during the period.

In each of the following industries, identify possible joint (or severable)products at the splitoff point. a. Coal b. Petroleum c. Dairy d. Lamb e. Lumber f. Cocoa Beans g. Christmas Trees h. Salt i. Cowhide

The net realizable value (NRV)method allocates joint costs to joint products produced during the accounting period on the basis of their relative NRV-final sales value plus separable costs.

Product X is sold for $32 a unit and Product Y is sold for $48 a unit. Each product can also be sold at the splitoff point. Product X can be sold for $10 and Product Y for $8. Joint costs for the two products totaled $2,000 for January for 300 units of X and 250 units of Y. What are the respective joint costs assigned each unit of products X and Y if the sales value at splitoff method is used?

The focus of joint costing is on allocating costs to individual products:

A negative consequence of recording byproducts in the accounting records when the sale occurs is that:

The benefits-received criteria for allocating joint costs indicate market-based measures are preferred because:

The products of a joint production process that have low total sales values compared with the total sales value of the main product are called joint products.

How much (if any)extra income would Morton earn if it produced and sold skim milk ice cream from goats rather than goat skim milk? Allocate joint processing costs based upon the relative sales value at the splitoff point.

Outputs with zero sales value are accounted for by:

Answer the following questions using the information below: The Gows Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result. The following information was collected for the month of October: The costs of purchasing the 130,000 gallons of unprocessed goat milk and processing it up to the splitoff point to yield a total of 117,000 gallons of salable product was $144,480. There were no inventory balances of either product. Condensed goat milk may be processed further to yield 39,000 gallons (the remainder is shrinkage)of a medicinal milk product, Xyla, for an additional processing cost of $3 per usable gallon. Xyla can be sold for $18 per gallon. Skim goat milk can be processed further to yield 56,200 gallons of skim goat ice cream, for an additional processing cost per usable gallon of $2.50. The product can be sold for $9 per gallon. There are no beginning and ending inventory balances. -Using the sales value at splitoff method, what is the gross-margin percentage for condensed goat milk at the splitoff point?

At or beyond the splitoff point, decisions relating to the sale or further processing of each identifiable product can be made independently of decisions about the other products.

When a joint production process yields two or more products with high total sales values, these products are called:

A byproduct is one or more products of a joint production process that have low total sales value compared to the total sales value of the main product or joint products.

Byproducts are recognized in the general ledger either at the time production is completed or at the time of sale.

What are the four methods of allocating joint costs to individual products? Which of these methods is preferred, and what are two advantages of this method?

Answer the following questions using the information below: The Gows Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result. The following information was collected for the month of October: The costs of purchasing the 130,000 gallons of unprocessed goat milk and processing it up to the splitoff point to yield a total of 117,000 gallons of salable product was $144,480. There were no inventory balances of either product. Condensed goat milk may be processed further to yield 39,000 gallons (the remainder is shrinkage)of a medicinal milk product, Xyla, for an additional processing cost of $3 per usable gallon. Xyla can be sold for $18 per gallon. Skim goat milk can be processed further to yield 56,200 gallons of skim goat ice cream, for an additional processing cost per usable gallon of $2.50. The product can be sold for $9 per gallon. There are no beginning and ending inventory balances. -What is the estimated net realizable value of Xyla at the splitoff point?