Fantasy Manufacturing produces three products in a joint operation.Information regarding the products appears below:\[\begin{array} { | l | r | r | r | r | } \hline & \text { Item1 } & \text { Item2 } & \text { Item 3 } & \text { Total } \\ \hline \text { Units Proouced } & 20,000 & 25,000 & 10,000 & 55,000 \\ \hline \begin{array} { l } \text { Sales Value at } \\ \text { Split-off } \end{array} & \$ 150,000 & \$ 50,000 & \$ 20,000 & \$ 220,000 \\ \hline \begin{array} { l } \text { Additional costs if } \\ \text { Processed further } \end{array} & \$ 10,000 & \$ 30,000 & \$ 5,000 & \$ 45,000 \\ \hline \begin{array} { l } \text { Sales Value if } \\ \text { Processed Further } \end{array} & \$ 170,000 & \$ 90,000 & \$ 28,000 & \$ 288,000 \\ \hline \text { Joint Costs } & & & & \$ 100,000 \\ \hline \end{array}\] Required: (a)Allocate the joint costs using the relative sales value at split-off method.(b)Allocate the joint costs using the constant gross margin percentage method.

(a)\[\begin{array} { | l | r | r | r |

Clean-Burn,Inc.is a small petroleum company that acquires high-grade crude oil from low-volume production wells owned by individuals and small partnerships.The crude oil is processed in a single refinery into Two Oil,Six Oil,and impure distillates.Clean-Burn does not have the technology or capacity to process these products further and sells most of its output each month to major refineries.There were no inventories on November 1.\[\begin{array} { | l | c | } \hline \text { Crude oil acquired and placed into production } & \$ 5,000,000 \\ \hline \text { Direct labor and related costs } & 2,000,000 \\ \hline \text { Refinery overhead } & 3,000,000 \\ \hline \end{array}\]Production and sales Two Oil,300,000 barrels produced;280,000 barrels sold at $20 each.Six Oil,240,000 barrels produced;220,000 barrels sold at $30 each.Distillates,120,000 barrels produced and sold at $15 per barrel.Required: a.Allocate the joint costs to the products using the physical quantities method.b.Allocate the joint costs to the products using the net realizable value method.

a.Two Oil: $4,545,455;Six Oil: $3,636,36

Match between columns Premises: Costs of chopping onions to be used in spaghetti sauce and soup in a food manufacturer Cost of processing wood and sawdust into particle board in a sawmill Costs of processing apples at a cider mill Cost of processing rejected meat parts into hot dogs in a meat processing plant Costs of processing pineapples into juice and sliced pineapples Costs of refining gasoline in (d) above Costs of running a fishing boat used to catch varieties of fish, lobsters, etc. Labor costs, of “shucking” clams to produce clam chowder Utility costs of processing timber for a lumber manufacturer Cost of planting, growing and picking pineapples in a pineapple factory Ingredients and packaging added to batches of spaghetti in (g) above Processing of pulp into paperboard in a paper manufacturer Depreciation on oil rigs for an oil producer

The Answer of joint product costs and costs incurred after is...

Exam 11: Service Department and Joint Cost Allocation

The following information relates to Osceola Corporation for the past accounting period. Direct costs Service Dept A \ 80,000 Service Dept B 60,000 Producing Dept C 15,000 Producing Dept D 20,000 $The following information relates to Osceola Corporation for the past accounting period. \begin{array} { | l | r | } \hline & \text { Direct costs } \\ \hline \text { Service Dept A } & \$ 80,000 \\ \hline \text { Service Dept B } & 60,000 \\ \hline \text { Producing Dept C } & 15,000 \\ \hline \text { Producing Dept D } & 20,000 \\ \hline \end{array} Using the simultaneous solution method,Department B's cost allocated to Department C is:$ Using the simultaneous solution method,Department B's cost allocated to Department C is:

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Question 1

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Portofino Manufacturing Corporation manufactures three products in a joint process.Additional information is as follows: Total Units produced 16,000 4,000 2,000 22,000 Sales value at split-off \ 300,000 \ 100,000 \ 20,000 \ 420,000 Addition costs if Processed further \ 48,000 \ 20,000 \ 6,000 \ 74,000 Sales value if processed Further \ 340,000 \ 160,000 \ 40,000 \ 540,000 Joint costs \ 120,000 Required: (a)Allocate the joint costs to the three products using the net realizable value method.(b)Determine which products should be sold at split-off and which products should be processed further.

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Question 2

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Only Products K and L should be processed further.Product J should be sold at split-off.

Dawson Corporation produces a product called Blocker,which gives rise to a by-product called Spotter.The only costs associated with Spotter are additional processing costs of $4 for each unit.Dawson accounts for Spotter's sales first by deducting its separable costs from its sales and then by deducting this net amount from the cost of sales of Blocker.This year,9,600 units of Spotter were produced.They were all sold for $8 each.Company operating expenses were $250,000 for the year.Sales revenue and cost of goods sold for Blocker were $1,600,000 and $800,000 respectively.(CPA adapted) Required: (a)Calculate the company's gross margin under the current accounting method.(b)Assume the company changes its accounting method and accounts for the by-product's net realizable value as "other revenue." Calculate the gross margin under the new method.(c)Under what circumstances would method a or b be preferred?

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Question 3

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(a)
$\begin{array} { | l | l | } \hline \text { Net Realiz able Value of Spotter } [ ( \$ 8 - 4 ) \times & \$ 38,400 \\9,600 ] \\\hline \begin{array} { l } \text { Cost of Goods Sold of Blocker } ( \$ 800,000 - \\38,400 ) \end{array} &761,600 \\\hline \begin{array} { l } \text { Gross Margin of Blocker } ( \$ 1,600,000 - \\\$ 761,600 )\end{array} & \$ 838,400 \\\hline\end{array}$
$\begin{array} { | l | r | } \hline \text { Sales } & \$ 1,600,000 \\\hline \text { Other Revenue } & 38,400 \\\hline \text { Total Revenue } & \$ 1,638,400 \\\hline \text { Cost of Goods Sold } & \underline{800,000} \\\hline \text { Gross Margin } & \$ 838,400 \\\hline\end{array}$ (c)While either method will result in the same gross margin for the company,treating the net realizable value as other revenue is the simpler method.Technically,the matching principle is violated if all products are not sold in the accounting period.However,because the effect is normally considered immaterial,it is used by many companies.Deducting the net realizable value from the cost of the main products can be more complicated if all main products are not sold.If all the main products produced in the period have not been sold,the net realizable value of by-products should be prorated to the main product inventories and cost of goods sold.

Which of the following is not a benefit of cost allocation?

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Question 4

Tenet Engineering,Inc.operates two user divisions as separate cost objects.To determine the costs of each division,the company allocates common costs to the divisions.During the past month,the following common costs were incurred: Computer servic es ( 85\% fixed) \ 260,000 Building occupancy 600,000 Personnel costs Total common costs \ 970,000 The following information is available concerning various activity measures and service usages by each of the divisions: Dirision A Division B Area occupied (square teet) 20,000 40,000 Payroll \ 380,000 \ 180,000 Computer time (hours) 200 220 Computer storage (megabytes) 4,050 -0- Equipment value \ 200,000 \ 250,000 Operating profit (pre-allocations) \ 565,000 \ 495,000 If all common costs are allocated using operating profit as the allocation basis,what is the total cost allocated to Division B?

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Question 5

For the purposes of allocating joint costs to joint products,the sales price at the point of sale,reduced by the cost to complete after split-off,is assumed to be equal to the: (CPA adapted)

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Question 6

Which of the three service department allocation methods should be used for decision making? Explain your reasoning.

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Question 7

The following set up is a system of simultaneous linear equations to allocate costs using the reciprocal method.Matrix algebra is not required.The following costs were incurred in three operating departments and three service departments in Westmoreland Company. Department Drect Costs Label Subassemblies \ 550,000 1 Final assembly 776,000 2 Marketing 285,000 3 Building occupancy 85,000 S1 Research\&development 120,000 2 Supervision 45,000 Use of services by other departments is as follows. $The following set up is a system of simultaneous linear equations to allocate costs using the reciprocal method.Matrix algebra is not required.The following costs were incurred in three operating departments and three service departments in Westmoreland Company. \begin{array} { | l | r | r | } \hline \text { Department } & \text { Drect Costs } & \text { Label } \\ \hline \text { Subassemblies } & \$ 550,000 & \mathrm { P } 1 \\ \hline \text { Final assembly } & 776,000 & \mathrm { P } 2 \\ \hline \text { Marketing } & 285,000 & \mathrm { P } 3 \\ \hline \text { Building occupancy } & 85,000 & S1 \\ \hline \text { Research\&development } & 120,000 & \mathrm {~S} 2 \\ \hline \text { Supervision } & 45,000 & \mathrm { S3 } \\ \hline \end{array} Use of services by other departments is as follows. The equation for department P2 (final assembly)is:$ The equation for department P2 (final assembly)is:

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Question 8

Fantasy Manufacturing produces three products in a joint operation.Information regarding the products appears below: Item1 Item2 Item 3 Total Units Proouced 20,000 25,000 10,000 55,000 Sales Value at Split-off \ 150,000 \ 50,000 \ 20,000 \ 220,000 Additional costs if Processed further \ 10,000 \ 30,000 \ 5,000 \ 45,000 Sales Value if Processed Further \ 170,000 \ 90,000 \ 28,000 \ 288,000 Joint Costs \ 100,000 Required: (a)Allocate the joint costs using the relative sales value at split-off method.(b)Allocate the joint costs using the constant gross margin percentage method.

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Question 9

Which of the following best describes the objective of joint cost allocation?

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Question 10

Highlands,Inc.operates a sawmill facility.The company accounts for the sawdust that results from the primary sawing operation as a by-product.The sawdust is sold to another company at a price of $1.00 per hundred cubic feet.Normally,sales revenue from the sawdust is $21,200 per month.The sawdust is charged to inventory at $2.20 per hundred cubic feet,although there is no direct cost to process it.As an alternative,Highlands can rent equipment that will process the dust into imitation logs for fireplaces.These logs sell for $25.00 per hundred to wholesalers,who package and add scent to them.75 logs can be produced from 100 cubic feet of sawdust.Cost of the equipment to produce these logs and the additional personnel required to operate the equipment are $360,000 per month,regardless of the output.Required: A)Should Highlands sell the sawdust for $1.00 per hundred cubic feet or process it into imitation logs? Support your answer with the appropriate calculations.

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Question 11

The human resource department in a manufacturing company would be considered a service department.

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Question 12

What is the difference between an intermediate cost center and a final cost center?

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Question 13

The following set up is a system of simultaneous linear equations to allocate costs using the reciprocal method.Matrix algebra is not required.The following costs were incurred in three operating departments and three service departments in Westmoreland Company. Department Drect Costs Label Subassemblies \ 550,000 1 Final assembly 776,000 2 Marketing 285,000 3 Building occupancy 85,000 S1 Research\&development 120,000 2 Supervision 45,000 Use of services by other departments is as follows. $The following set up is a system of simultaneous linear equations to allocate costs using the reciprocal method.Matrix algebra is not required.The following costs were incurred in three operating departments and three service departments in Westmoreland Company. \begin{array} { | l | r | r | } \hline \text { Department } & \text { Drect Costs } & \text { Label } \\ \hline \text { Subassemblies } & \$ 550,000 & \mathrm { P } 1 \\ \hline \text { Final assembly } & 776,000 & \mathrm { P } 2 \\ \hline \text { Marketing } & 285,000 & \mathrm { P } 3 \\ \hline \text { Building occupancy } & 85,000 & S1 \\ \hline \text { Research\&development } & 120,000 & \mathrm {~S} 2 \\ \hline \text { Supervision } & 45,000 & \mathrm { S3 } \\ \hline \end{array} Use of services by other departments is as follows. The equation for department S1 (building occupancy)is:$ The equation for department S1 (building occupancy)is:

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Question 14

Steven Parker owns and operates Steven's Septic Service and Legal Advice.Steven's two revenue generating (production)operations are supported by two service departments: Clerical and Janitorial.Costs in the service departments are allocated in the following order using the designated allocation bases: Clerical: Variable cost: expected number of work orders processed Fixed cost: long-run average number of work orders processed Janitorial: Variable cost: labor hours Fixed cost: square footage of space occupied Average and expected activity levels for next month (June)are as follows: $Steven Parker owns and operates Steven's Septic Service and Legal Advice.Steven's two revenue generating (production)operations are supported by two service departments: Clerical and Janitorial.Costs in the service departments are allocated in the following order using the designated allocation bases: Clerical: Variable cost: expected number of work orders processed Fixed cost: long-run average number of work orders processed <u>Janitorial:</u> Variable cost: labor hours Fixed cost: square footage of space occupied Average and expected activity levels for next month (June)are as follows: Expected costs in the service departments for June are as follows: \begin{array} { | l | r | r | } \hline & \text { Clerical } & \text { Janitorial } \\ \hline \text { Variable costs } & \$ 12,000 & \$ 4,200 \\ \hline \text { Fixed costs } & \$ 8,400 & \$ 800 \\ \hline \end{array} Under the step method of allocation,how much Clerical service cost should be allocated to the Septic Service operation for June? (Assume Clerical costs are allocated before Janitorial costs and round all calculations to the nearest whole dollar. )$ Expected costs in the service departments for June are as follows: Clerical Janitorial Variable costs \ 12,000 \ 4,200 Fixed costs \ 8,400 \ 800 Under the step method of allocation,how much Clerical service cost should be allocated to the Septic Service operation for June? (Assume Clerical costs are allocated before Janitorial costs and round all calculations to the nearest whole dollar. )

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Question 15

Clean-Burn,Inc.is a small petroleum company that acquires high-grade crude oil from low-volume production wells owned by individuals and small partnerships.The crude oil is processed in a single refinery into Two Oil,Six Oil,and impure distillates.Clean-Burn does not have the technology or capacity to process these products further and sells most of its output each month to major refineries.There were no inventories on November 1. Crude oil acquired and placed into production \ 5,000,000 Direct labor and related costs 2,000,000 Refinery overhead 3,000,000 Production and sales Two Oil,300,000 barrels produced;280,000 barrels sold at $20 each.Six Oil,240,000 barrels produced;220,000 barrels sold at $30 each.Distillates,120,000 barrels produced and sold at $15 per barrel.Required: a.Allocate the joint costs to the products using the physical quantities method.b.Allocate the joint costs to the products using the net realizable value method.

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Question 16

Simpson Manufacturing Enterprises uses a joint production process that produces three products at the split-off point.Joint production costs during April were $720,000.The company uses the net realizable value method for allocating joint costs.Product information for April was as follows: Required: a.Assume that all three products are main products and that they can be sold at the split-off point or processed further,whichever is economically beneficial to Simpson.Allocate the joint costs to the three products.b.Assume that Simpson uses the physical quantities method to allocate the joint costs.How much would be allocated to each of the three products?

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Question 17

Indicate whether the following costs would be treated as joint-product costs or costs incurred after the split-off point.Use J for joint product costs and S for costs incurred after the split-off point.

Costs of chopping onions to be used in spaghetti sauce and soup in a food manufacturer

joint product costs

Cost of processing wood and sawdust into particle board in a sawmill

costs incurred after the split-off point

Costs of processing apples at a cider mill

Correct Answer:

Verified

Costs of chopping onions to be used in spaghetti sauce and soup in a food manufacturer

Cost of processing wood and sawdust into particle board in a sawmill

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Question 18

Cordner Corporation has two production Departments: P1 and P2 and two service departments: S1 and S2.Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows: Under the step-method of allocation,the total amount of service costs allocated to producing departments would be:

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Question 19

Bartoff Foods produces three supplemental food products simultaneously through a refining process costing $186,000.The joint products,Bulkup and Bodybuilder,have a final selling price of $8 per pound and $10 per pound,respectively,after additional processing costs of $2 per pound for each product incurred after the split-off point.Quicksnack,a by-product,is sold at the split-off point for $6 per pound.The production of Bulkup results in 20,000 pounds with a caloric value of 6,000 calories per pound.The production of Bodybuilder,which is very high in carbohydrates,has a caloric value of 12,500 calories per pound.10,000 pounds of Bodybuilder are produced.Quicksnack has a caloric value of 2,000 calories a pound and 2,000 pounds are produced.(CMA adapted) Required: (a)Allocate the joint product costs using the net-realizable-value method,assuming that Quicksnack is accounted for as a by-product,with its net realizable value deducted from the cost of the main products.(b)Allocate the joint product costs using the physical measures method,assuming that Quicksnack is accounted for as a by-product,with its sales revenue accounted for as "other revenue." (c)Compute Bartoff Food's gross margin under requirements a and b.

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Question 20

Showing 1 - 20 of 151

Which of the following is not a benefit of cost allocation?

For the purposes of allocating joint costs to joint products,the sales price at the point of sale,reduced by the cost to complete after split-off,is assumed to be equal to the: (CPA adapted)

Which of the three service department allocation methods should be used for decision making? Explain your reasoning.

Which of the following best describes the objective of joint cost allocation?

The human resource department in a manufacturing company would be considered a service department.

What is the difference between an intermediate cost center and a final cost center?

Cost Accounting: Information for Decision Making

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

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Exam 11: Service Department and Joint Cost Allocation

The following information relates to Osceola Corporation for the past accounting period. Direct costs Service Dept A \ 80,000 Service Dept B 60,000 Producing Dept C 15,000 Producing Dept D 20,000 Using the simultaneous solution method,Department B's cost allocated to Department C is:

Which of the following is not a benefit of cost allocation?

For the purposes of allocating joint costs to joint products,the sales price at the point of sale,reduced by the cost to complete after split-off,is assumed to be equal to the: (CPA adapted)

Which of the three service department allocation methods should be used for decision making? Explain your reasoning.

Which of the following best describes the objective of joint cost allocation?

The human resource department in a manufacturing company would be considered a service department.

What is the difference between an intermediate cost center and a final cost center?

Cost Accounting: Information for Decision Making

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters