Exam 16: Cost Allocation: Joint Products and Byproducts

The Carolina 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 constant gross-margin percentage NRV method of joint cost allocation ________.

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. -If separable costs of Butter Cream was 16,000 and constant gross margin was 25%,what would have been the allocated joint costs of Condensed Milk?

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 constant gross margin percent for Brital?

The sales value at splitoff method presupposes the exact number of subsequent steps undertaken for further processing.

If the value of a byproduct drops significantly,it could also be viewed as a joint product.

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. -The production method will report Product X in the balance sheet at ________.

In joint costing,using physical measures at splitoff to allocate costs enables the accountant to obtain individual product costs and gross margins.

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. -How much is the ending inventory for the byproduct if byproducts are recognized in the general ledger at the point of sale?

Answer the following questions using the information below: The Berkel Corporation manufactures Widgets, Gizmos, and Turnbols from a joint process. June production is 5,000 widgets; 8,750 gizmos; and 10,000 turnbols. Respective per unit selling prices at splitoff are $75, $50, and $25. Joint costs up to the splitoff point are $187,500. -What amount of joint costs will be allocated to the Gizmos?

Which of the following statements is true of joint costing?

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.

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?

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

In joint costing,the constant gross-margin percentage method recognizes that the profit margin is not just attributable to the joint process but is also derived from the costs incurred after splitoff.

In joint costing,the sales value at splitoff method is typically used in preference to the NRV method only when net realizable value for one or more products at splitoff do not exist.

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?

Joint costs are the costs of a production process that yields multiple products simultaneously.

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 ________.

Allocating joint costs to individual products can be helpful for litigation settlement purposes in which the costs of joint products or services are key inputs.