Exam 15: Cost Allocation: Joint Products and Byproducts

Juno Ltd. manufactures three separate products Q, R, and S from a joint production process . During March, the joint costs of processing were $875,000. 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 NRV method is used.

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

Answer the following question(s) using the information below: The Morton 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 65,000 litres of unprocessed goat milk and processing it up to the splitoff point to yield a total of 58,500 litres of salable product was $72,240. There were no inventory balances of either product. Condensed goat milk may be processed further to yield 19,500 litres (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $3 per usable litre. Xyla can be sold for $18 per litre. Skim goat milk can be processed further to yield 28,100 litres of skim goat ice cream, for an additional processing cost per usable litre of $2.50. The product can be sold for $9 per litre. There are no beginning and ending inventory balances. -The incremental benefit or (loss) of processing Jarlon into Jaxton is:

Which statement is NOT true regarding the sales method of accounting for byproducts.

An advantage of the sales value at split off method is

Separable costs include manufacturing costs only.

Products with a zero sales value are known as

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.

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