Exam 16: Cost Allocation: Joint Products and Byproducts

Red Sauce Canning Company processes tomatoes into catsup,tomato juice,and canned tomatoes.During the summer of 2017,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: 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.

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

The Alfarm Corporation processes raw milk up to the split-off 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: The cost of purchasing 800,000 gallons of direct materials and processing it up to the split-off point to yield a total of 778,500 gallons of good product was $2,350,000.Which of the following statements about Alfarm's joint production costs is true?

The constant gross-margin percentage NRV method is the only method of allocating joint costs under which products may receive negative allocations.

The constant gross-margin percentage NRV method allocates joint costs to joint products in such a way that the gross margin on each joint product is the same as it was in the previous year.

The sales value at split-off 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.

Berkel Company processes sugar cane into three products.During May,the joint costs of processing were $600,000.Production and sales value information for the month were as follows: Required: Determine the amount of joint cost allocated to each product if the sales value at split-off method is used.

In joint costing,the constant gross-margin percentage NRV method is an example of allocating costs using physical measures.

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

An example of allocating joint costs using physical measures is allocating joint costs based on the ________.

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?

Netzone Company is in semiconductor industry and fabrication of silicon-wafer chips splits off two types of memory chips,Standard and Premium.The following information was collected for last quarter of the calendar year: The cost of purchasing 400 kgs of direct materials and processing it up to the split-off point to yield a total of 16,800 chips of good products was $1,950,000.Beginning inventories totalled 140 chips for Standard and 90 chips for Premium.Ending inventory amounts reflected 140 chips of Standard and 90 chips of Premium.October costs per unit were the same as November.When using a physical-volume measure,what is the approximate amount of joint costs that will be allocated Standard chips? (Round intermediary percentages to the nearest hundredth. )

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.

The Green Company processes unprocessed goat milk up to the split-off 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 of unprocessed goat milk and processing it up to the split-off point to yield a total of 102,500 gallons of saleable product was $186,480.There were no inventory balances of either product.Condensed goat milk may be processed further to yield 42,500 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 $21 per gallon. Skim goat milk can be processed further to yield 58,200 gallons of skim goat ice cream,for an additional processing cost per usable gallon of $3.The product can be sold for $8 per gallon. There are no beginning and ending inventory balances. Using the sales value at split-off method,what is the gross-margin percentage for condensed goat milk at the split-off point? (Round intermediary percentages to the nearest hundredth. )

When the selling prices at the split-off are unavailable,the NRV method is the best alternative.

When a single manufacturing process yields two products,one of which has a relatively high sales value compared to the other,the two products are respectively known as ________.

An advantage of the physical-measure method is that obtaining physical measures for all products is an easy task.

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?

Before the split-off point,decisions relating to the sale or further processing of each identifiable product cannot be made independently of decisions about the other products.

Classification of main products,joint products,and byproducts can always be done with ease.