Exam 11: Service Department and Joint Cost Allocation

In joint product costing and analysis,which one of the following costs is relevant when deciding the point at which a product should be sold in order to maximize profits? (CMA adapted)

The method of accounting for joint product costs that will produce the same gross margin percentage for all products is the:

The estimated net realizable value for a product is its estimated selling price after processing the product beyond the split-off point.If the products require further processing before they are marketable,it could be necessary to estimate the net realizable value at the split-off point.

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)

Cincinnati Million,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: The following information is available concerning various activity measures and service usages by each of the divisions: If all common costs are allocated using operating profit as the allocation basis,what is the total cost allocated to Division B?

With the reciprocal method,the total service department costs less the direct costs of the service department equals the cost allocated to the service department.Direct costs + costs allocated from other services = total cost.

Vreeland,Inc. ,manufactures products X,Y,and Z from a common process.Joint costs were $60,000.Additional information is as follows: Assuming that joint product costs are allocated using the net realizable value method,what were the total costs assigned to Product Y?

Allocated joint costs are useful for:

The selection of an allocation base in the direct method is easier than the selection of an allocation base in the step method.The allocation base would remain constant across the three allocation methods.

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 Reality Company. Use of services by other departments is as follows. The equation for department P3 (marketing)is:

In general,it is better to use a product's market value at the split-off point than its estimated net realizable value in allocating joint costs.Actual market value is better than an estimate.

One potential disadvantage of the reciprocal method is it could overstate the cost of running the organization's service departments.The reciprocal method is the most accurate method.

Lite Co.manufactures products X and Y from a joint process that also yields a by-product,Z.Revenue from sales of Z is treated as a reduction of joint costs.Additional information is as follows: Joint costs were allocated using the net realizable value method at the split-off point.The joint costs allocated to product X were

Which of the following would be an appropriate cost-allocation base for allocating the cost of the company cafeteria?

Brandeis 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 cost allocation,the amount of S2 costs allocated to S1 would be:

In deciding whether to outsource a service department or not,the cost of the service department should be estimated using the step method of allocation.The reciprocal method should be used as it is the most accurate method.

Which of the following service departments could logically use space occupied (square footage)to allocate its costs to user departments?

The characteristic that is most often used to distinguish a product as either a main product or a by-product is the amount of:

Raymer Corporation produced 3,660 units,consisting of three separate products,in a joint process for the year.The market for these products was so unstable that it was not practical to estimate the selling price of the products.A cost of $425,000 was incurred in the joint process.Product X's production was 80% of product Y's while product Z's production was 125% of product Y's.What is the amount of the joint cost allocable to product X assuming Raymer uses the physical quantities method of allocation?

Cincinnati Million,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: The following information is available concerning various activity measures and service usages by each of the divisions: If common computer service costs are allocated using computer time as the allocation basis,what is the computer cost allocated to Division B?