Exam 11: Service Department and Joint Cost Allocation

Since by-products have minor sales value,alternative methods of accounting for them will not have a material effect on the financial statements.The sales value is immaterial,so the alternate results would be immaterial.

The estimated net realizable value at the split-off point is calculated by taking the sales value after further processing and deducting the additional processing costs.This is the definition of estimated net realizable value.

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 production costs are allocated using the physical quantities method (units produced),what were the costs allocated to Product X?

The step method allocates some,but not all,service department costs to other service departments.In allocating service department costs,the majority of the services provided are usually allocated to the production departments.Once the costs of a service department have been allocated,it is considered "closed" and cannot be the recipient in future allocations.

Product C is one of several joint products that come out of Department M.The joint costs incurred in Department M total $40,000.Product C can be sold at split-off or processed further and sold as a higher quality item.The decision to process further should be based on the:

Which of the following statements is false regarding the use of multiple cost pools?

Which of the following statements regarding accounting for by-products is true?

Anchorage Company manufactures three main products,L,M,and N,from a joint process.Additional information for June production activity follows: Assuming that the 10,000 units of N were processed further and sold for $78,000,what was Anchorage's gross profit from this sale? Assume the physical quantities method of allocation is used.

Which of the following statements is (are)false regarding the direct method of allocating service department costs? (A)The selection of an allocation base in the direct method is easier than the selection of an allocation base in the step method.(B)Once an allocation is made from a service department using the direct method,no further allocations are made back to that department.

Great Sweets Candy Company produces various types of candies.Several candies could be sold at the split-off point or processed further and sold in a different form after further processing.The candies are produced in a joint processing operation with $500,000 of joint processing costs monthly,which are allocated based on pounds produced.Information concerning this process for a recent month appears below: The joint processing costs in this operation:

LaCrescent University has 20 departments.Two of its best departments are the (1)College of UBW (Underwater Basket Weaving)and (2)Testing Services.The College of UBW attempts to teach students the difficult,but useful,skill of weaving baskets underwater.Testing Services grades examinations for professors.How would these two departments be classified?

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 allocation,the total amount of service costs allocated to producing departments would be:

If by-product revenue is treated as other revenue instead of deducted from the net-realizable-value of the main products:

Which of the following is not a reason to justify the allocation of support services?

Joint products are outputs from common inputs and a common production process.This is the definition of joint products.

Computer Complex,Inc.has two main services: (1)time on a timeshared computer system,and (2)proprietary computer programs.Computer time is provided by the operation department (Op)and programs are written by the programming department (P) The percentage of each service used by each department for a typical period is: In a typical period,the operation department (Op)spends $4,500 and the programming department (P)spends $2,500.Under the step method (Op first),what is the cost of the computer time and the computer programs for sale?

Products X,Y,and Z are produced from the same process at a cost of $5,200.Five thousand pounds of raw material yields 1,500 X,2,500 Y,and 1,000 Z.Selling prices are: X $2 per unit,Y $4 per unit,Z valueless.The ending inventory of X is 50 units.What is the value of the ending inventory if joint costs are allocated using net realizable value?

One advantage of the step method is that all reciprocal services are recognized between service departments.In the step method,once the costs of a service department have been allocated,it is considered "closed" and cannot be the recipient in future allocations.

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 direct-method of cost allocation,the amount of S1 costs allocated to the S2 would be:

Zebra Manufacturing Company incurred a joint cost of $600,000 in the production of R and S in a joint process.Presently,1,800 of R and 1,400 of S are being produced each month.Management plans to decrease R's production by 300 units in order to increase the production of S by 500 units.Additionally,this change will require minor modifications,which will add $20,000 to the joint cost.This cost is entirely attributable to product S.What is the amount of the joint costs allocable to R and S before changes to existing production assuming Zebra allocates their joint costs according to the proportion of S and R produced?