Exam 16: Cost Allocation: Joint Products and Byproducts

Joint costing allocates the joint costs to the individual products that are eventually sold.

Which of the following statements best define splitoff point in joint costing?

In joint costing,the potential conflict between cost concepts used for decision making and cost concepts used for evaluating the performance of managers will be most severe when the ________ method is used.

List the reasons that the sales value at splitoff method of joint cost allocation should be used.

Answer the following questions using the information below: Bismite Corporation purchases trees from Cheney lumber and processes them up to the splitoff point where two products (paper and pencil casings) are obtained. The products are then sold to an independent company that markets and distributes them to retail outlets. The following information was collected for the month of October: Trees processed: 250 trees Production: paper 180,000 sheets pencil casings 180,000 Sales: paper 174,000 at \ 0.12 per page pencil casings 178,500 at \ 0.15 per casing The cost of purchasing 250 trees and processing them up to the splitoff point to yield 180,000 sheets of paper and 180,000 pencil casings is $12,500. Bismite's accounting department reported no beginning inventory. -What is the total sales value at the splitoff point for paper?

What type of cost is the result of an event that results in more than one product or service simultaneously?

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. -What is the estimated net realizable value of Xyla at the splitoff point?

Separable costs that do not differ between alternatives are irrelevant for decision making.

Which of the following statements is true of main products and byproducts?

Products with a relatively low sales value are known as ________.

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 the sales value at splitoff method,what is the gross-margin percentage for skim goat milk at the splitoff point?

The constant gross-margin percentage NRV method is the only method whereby products can receive negative allocations.

The net realizable value (NRV)method method allocates joint costs to joint products produced during the accounting period in such a way that each individual product achieves an identical gross-margin percentage.

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 total allocated joint costs of production?

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. -Which of the following statements is true of Brital?

The only allowable method of joint cost allocation is specified by FASB.

Which of the methods of allocating joint costs usually is considered the simplest to implement?

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

What revenue or expense amounts are necessary to make a sell-or-process-further decision and why? What items are irrelevant to the decision and why?

What are the reasons for allocating joint costs to individual products or services?