Exam 16: Cost Allocation: Joint Products and Byproducts

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

Paragon University operates an extensive and an expensive registration,testing,and counseling center,through which all students are required to pass through when they enter the university.The registration effort's costs (for the most part)are almost impossible to allocate based upon which students require time,effort,etc.The cost of this center is approximately 15% of the total costs of Paragon.This department engages in no other activities than the registration of students.Paragon is interested in determining the profitability of the three technical departments it operates.Paragon has the perception that some departments are more profitable than others,and it would like to determine an appropriate method of allocating the costs of this registration center. Required: Recommend to Paragon University a method (or methods)of allocating the costs of registration to the three departments.

Red Sauce Canning Company processes tomatoes into catsup,tomato juice,and canned tomatoes.During the summer of 20X5,the joint costs of processing the tomatoes were $420,000.There was no beginning or ending inventories for the summer.Production and sales value information for the summer is as follows: Product Cases Sales Value at Splitoff Point Separable Costs Selling Price Catsup 100,000 \ 6 per case \ 3.00 per case \ 28 per case Tuice 150,000 8 per case 5.00 per case 25 per case Canned 200,000 5 per case 2.50 per case 10 per case Required: Determine the amount allocated to each product if the estimated net realizable value method is used,and compute the cost per case for each product.

Answer the following questions using the information below: The Kenton Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The following information was collected for the month of June: Direct Materials processed: 18,000 gallons (after shrinkage) Production: Butter Cream 7,500 gallons Condensed Milk 10,500 gallons Sales: Butter Cream 7,000 gallons Condensed Milk 10,000 gallons Sales Price: Butter Cream \ 3.5 per gallon Condensed Milk \ 7.5 per gallon Separable costsin total: Butter Cream \ 12,500 Condensed Milk \ 34,700 The cost of purchasing the of unprocessed milk and processing it up to the splitoff point to yield a total of 18000 gallons of saleable product was $46,000. The company uses constant gross-margin percentage NRV method to allocate the joint costs of production. -What is the allocated joint costs of Butter Cream?

Answer the following questions using the information below: The Kenton Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The following information was collected for the month of June: Direct Materials processed: 18,000 gallons (after shrinkage) Production: Butter Cream 7,500 gallons Condensed Milk 10,500 gallons Sales: Butter Cream 7,000 gallons Condensed Milk 10,000 gallons Sales Price: Butter Cream \ 3.5 per gallon Condensed Milk \ 7.5 per gallon Separable costsin total: Butter Cream \ 12,500 Condensed Milk \ 34,700 The cost of purchasing the of unprocessed milk and processing it up to the splitoff point to yield a total of 18000 gallons of saleable product was $46,000. The company uses constant gross-margin percentage NRV method to allocate the joint costs of production. -What is the constant gross-margin percent for Kenton?

Answer the following questions using the information below: Torid Company processes 17,500 gallons of direct materials to produce two products, Product X and Product Y. Product X sells for $5 per gallon and Product Y, the main product, sells for $150 per gallon. The following information is for December: Production Sales Beginning Inventory Ending Inventory Product X: 5,375 5,300 0 75 Product Y: 9,975 9,990 25 10 The manufacturing costs totalled $25,000. -Under production method,Product X NRV would be offset against the costs of Product Y by ________.

Answer the following questions using the information below: The Alfarm Corporation processes raw milk up to the splitoff point where two products, cream and liquid skim, are produced and sold. There was no beginning inventory. The following material was collected for the month of February: Direct materials processed: 750,000 gallons (727,500 gallons of good product) Production: Cream 442,500 gallons Liquid skim 285,000 gallons Sales: Cream 421,500 at \ 110 per gallon Liquid skm 273,000 at \ 100 per gallon The cost of purchasing 750,000 gallons of direct materials and processing it up to the splitoff point to yield a total of 727,500 gallons of good product was $2,280,000. -What are the physical-volume proportions to allocate joint costs for cream and liquid skim,respectively?

The sales method for recognizing byproducts is conceptually correct because it is consistent with the matching principle.

Answer the following questions using the information below: The Alfarm Corporation processes raw milk up to the splitoff point where two products, cream and liquid skim, are produced and sold. There was no beginning inventory. The following material was collected for the month of February: Direct materials processed: 750,000 gallons (727,500 gallons of good product) Production: Cream 442,500 gallons Liquid skim 285,000 gallons Sales: Cream 421,500 at \ 110 per gallon Liquid skm 273,000 at \ 100 per gallon The cost of purchasing 750,000 gallons of direct materials and processing it up to the splitoff point to yield a total of 727,500 gallons of good product was $2,280,000. -When using the physical-volume method,what is Cream's approximate production cost per gallon?

Answer the following questions using the information below: The Brital Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The following information was collected for the month of June: Direct Materials processed: 28,000 gallons production: butter Cream 12,500 gallons Condensed Milk 15,500 gallons Sales: Gutter Cream 12,000 gallons Condensed Milk 15,006 gallons Sales: butter Cream \ 2.5 per gallon Condensed Milk \ 5.5 per gallon Separable costs in total: butter Cream \ 13,500 Condensed Milk \ 33,708 The costs of purchasing the of unprocessed milk and processing it up to the splitoff point to yield a total of 28,000 gallons of saleable product was $46,000. The company uses constant gross-margin percentage NRV method to allocate the joint costs of production. -What is the allocated joint costs of Butter Cream?

Which of the following statements is true of joint production process and its components?

All products yielded from joint product processing have some positive value to the firm.

The production method for recognizing byproducts is simpler and is often used in practice,primarily because the dollar amounts of byproducts are immaterial.

In joint costing,the sales value at splitoff method allocates joint costs entirely to joint products sold during the accounting period on the basis of the relative total sales value at the splitoff point.

Explain why some companies choose not to allocate joint costs to products.

A reason why a physical-measure to allocate joint costs is less preferred than the sales value at splitoff is because ________.

Firms should be wary of using the full cost of a joint product as the basis for making pricing decisions.Why?

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

Answer the following questions using the information below: The Green 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: $\text { Direct Materials processed: } \quad 98,000 \text { gallons (after shrinkage) }$ Proauction: Condensed goat milk 42,500 gallons Skim goat milk 55,500 gallons Sales: Condensed goat milk \ 3.50 per gallon skim goat milk \ 2.50 per gallon The costs of purchasing the of unprocessed goat milk and processing it up to the splitoff point to yield a total of 98,000 gallons of saleable product was $184,480. There were no inventory balances of either product. Condensed goat milk may be processed further to yield 42,000 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $4 per usable gallon. Xyla can be sold for $20 per gallon. Skim goat milk can be processed further to yield 54,200 gallons of skim goat ice cream, for an additional processing cost per usable gallon of $4. The product can be sold for $9 per gallon. There are no beginning and ending inventory balances. -Using estimated net realizable value,what amount of the joint costs would be allocated Xyla and the skim goat ice cream?

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