Deck 6: Joint and By-Product Costing

Question 1

Figure 6-3
Bond Ltd., which manufactures products W, X, Y, and Z through a joint process costing £18,000, has the following data for 2011:
Refer to Figure 6-3. What is the amount of joint costs assigned to Product X using the sales-value-at-split-off method?

A) £18,000
B) £10,000
C) £3,000
D) £2,700

Answer 1

C

Question 2

A ____ is a secondary product recovered in the course of manufacturing a primary product during a joint process.

A) by-product
B) joint product
C) main product
D) both a and c

Answer 2

A

Question 3

Joint products are

A) indistinguishable before the split-off point.
B) distinguishable before the split-off point.
C) indistinguishable after the split-off point.
D) distinguishable throughout the entire manufacturing process.

Answer 3

A

Question 4

Figure 6-4
Deli Products produces two products, X and Y, in a single process. In 2011, the joint costs of this process were £25,000. In addition, 4,000 units of X and 6,000 units of Y were produced. Separable processing costs beyond the split-off point were: X-£10,000; Y-£20,000. X sells for £10.00 per unit; Y sells for £7.50 per unit.
Refer to Figure 6-4. What amount of joint costs will be allocated to product X using the estimated net realizable value method?

A) £13,636
B) £40,000
C) £39,000
D) £11,765

Question 5

Amos, SA., manufactures products A and B from a joint process. Joint product costs were £40,000 during the month of October. Additional information is as follows: Amos uses the sales-value-at-split-off method of joint cost allocation. What is the amount of joint product costs to be allocated to products A and B in October, respectively?

A) £20,000; £20,000
B) £22,000; £18,000
C) £28,000; £12,000
D) £18,000; £22,000

Question 6

Amos, SA., manufactures products A and B from a joint process. Joint product costs were £40,000 during the month of October. Additional information is as follows: Sales Values at
Product
Units Produced
Split-Off
A
14,000
£110,000
B
6,000
£90,000
Amos uses the physical units method of joint cost allocation. What is the amount of joint product costs to be allocated to products A and B in October, respectively?

A) £20,000; £20,000
B) £22,000; £18,000
C) £28,000; £12,000
D) £12,000; £28,000

Question 7

Which of the following is a by-product of agricultural and food Industries?

A) meat
B) flour
C) fresh fish
D) fertilizer

Question 8

The ____ is where products become distinguishable after passing through a common process.

A) work in progress
B) relevant point
C) break-even point
D) split-off point

Question 9

____ are products with substantial value which are produced simultaneously by the same process up to a split-off point.

A) By-products
B) Joint products
C) Minor products
D) Both a and b

Question 10

Figure 6-3
Bond Ltd., which manufactures products W, X, Y, and Z through a joint process costing £18,000, has the following data for 2011:
Refer to Figure 6-3. What is the amount of joint costs assigned to Product Y using the sales-value-at-split-off method?

A) £7,200
B) £3,600
C) £18,000
D) £1,200

Question 11

Carey Ltd. manufactures Products X and Y from a joint process. Joint product costs were £60,000 during the month of December. Additional information is as follows: What is the amount of joint product costs to be allocated to Product X during December using the sales-value-at-split-off method?

A) £20,000
B) £45,000
C) £51,429
D) £40,000

Question 12

Which of the following would generally be a by-product?

A) canned fish
B) hamburger
C) cow hides
D) pineapples

Question 13

Carey Ltd. manufactures products X and Y from a joint process. Joint product costs were £60,000 during the month of December. Additional information is as follows: Sales Values at
Product
Units Produced
Split-Off per Unit
X
10,000
£24
Y
5,000
£8
What is the amount of joint product costs to be allocated to product X during December using the physical units method?

A) £20,000
B) £45,000
C) £15,000
D) £40,000

Question 14

The sales-value-at-split-off method allocates joint production costs based on each product's share of

A) revenues realized at the split-off point.
B) costs realized at the split-off point.
C) final sales value less further processing costs after the split-off point.
D) units produced at the split-off point.

Question 15

Joint costs are

A) separable.
B) allocated on the basis of cause and effect relationships.
C) allocated arbitrarily.
D) all of the above.

Question 16

Which joint cost allocation method is described by the following statement? Joint cost is backed into. First, overall sales revenue minus overall costs (joint plus further processing costs) is calculated to yield gross profit and the gross profit percentage. Then, each product is assigned the same cost of goods sold percentage.

A) constant gross margin method
B) weighted average method
C) sales-value-at-split-off method
D) net realizable method

Question 17

Which of the following industries would most likely have joint costs in production?

A) flour milling
B) dairy products
C) commercial fishing
D) all of the above

Question 18

The cost of crude oil used in producing gasoline products is an example of

A) joint costs.
B) a by-product.
C) joint products.
D) common cost allocation.

Question 19

Which joint cost allocation method is described by the following statement? Joint cost is prorated to the products on the basis of each product's share of units.

A) physical units method
B) weighted average method
C) sales-value-at-split-off method
D) net realizable value method

Question 20

Which of the following methods allocates joint production costs based on their proportionate share of eventual revenue less further processing costs?

A) sales-value-at-split-off method
B) net realizable value method
C) physical units method
D) replacement cost method

Question 21

Figure 6-7
Suppose that a concrete manufacturer produces four grades of concrete totaling 500,000 cubic yards as follows at a joint cost of £2,000,000:
Refer to Figure 6-7. What amount of joint costs will be allocated to Grade C using the constant gross margin percentage method?

A) £2,000,000
B) £252,000
C) £448,000
D) £1,280,000

Question 22

Figure 6-7
Suppose that a concrete manufacturer produces four grades of concrete totaling 500,000 cubic yards as follows at a joint cost of £2,000,000:
Refer to Figure 6-7. Grade C can be made into bricks. The final sales value will increase to £900,000. The additional cost to make the bricks is £250,000. Should the concrete be processed into bricks?

A) Sell now.
B) Produce bricks; profits will increase £200,000.
C) Produce bricks; profits will increase £900,000.
D) Produce bricks; profits will increase £450,000.

Question 23

Karl Body Parts produces three products in a joint process: Arms, Legs, and Heads. The joint costs are as follows: The hypothetical values for Arms, Legs, and Heads are £40,000, £50,000, and £30,000, respectively. If management processes the three products beyond the split-off point, sales values for Arms, Legs, and Heads would increase to £75,000, £65,000, and £60,000, respectively. In order to process the products further, the company must incur separable costs of £7,000, £16,000, and £5,000 for products Arms, Legs, and Heads, respectively. Karl uses the sales-value-at-split-off method to allocate joint costs. Should Karl Body Parts process Arms further?

A) Process further; profits will increase £28,000.
B) Sell now.
C) Process further; profits will increase £35,000.
D) Process further; profits will increase £68,000.

Question 24

Figure 6-8
James Ltd. produces three products in a joint process: A, B, and C. The joint costs are as follows: The split-off values for A, B, and C are £80,000, £100,000, and £60,000, respectively. If management processes the three products beyond the split-off point, sales values for A, B, and C would increase to £150,000, £130,000, and £120,000, respectively. In order to process the products further, the company must incur separable costs of £14,000, £12,000, and £10,000 for products A, B, and C, respectively. James uses the sales-value-at-split-off method to allocate joint costs.
Refer to Figure 6-8. Should James Ltd. process A further?

A) Process further; profits will increase £56,000.
B) Sell now.
C) Process further; profits will increase £70,000.
D) Process further; profits will increase £136,000.

Question 25

Figure 6-6
Suppose that a sawmill processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of £300,000:
Refer to Figure 6-6. What is the gross profit of No. 3 common if the constant gross margin percentage method is used?

A) £45,900
B) £168,750
C) £81,600
D) £135,000

Question 26

A joint producft should be processed beyond split-off if additional revenue from further processing exceeds

A) joint costs.
B) allocated joint costs.
C) allocated joint costs and additional costs of further processing.
D) additional costs of further processing.

Question 27

Figure 6-8
James Ltd. produces three products in a joint process: A, B, and C. The joint costs are as follows: The split-off values for A, B, and C are £80,000, £100,000, and £60,000, respectively. If management processes the three products beyond the split-off point, sales values for A, B, and C would increase to £150,000, £130,000, and £120,000, respectively. In order to process the products further, the company must incur separable costs of £14,000, £12,000, and £10,000 for products A, B, and C, respectively. James uses the sales-value-at-split-off method to allocate joint costs.
Refer to Figure 6-8. Should James Ltd. process C further?

A) Process further; profits will increase £56,000.
B) Process further; profits will increase £66,000.
C) Process further; profits will increase £50,000.
D) Sell now.

Question 28

Figure 6-4
Deli Products produces two products, X and Y, in a single process. In 2011, the joint costs of this process were £25,000. In addition, 4,000 units of X and 6,000 units of Y were produced. Separable processing costs beyond the split-off point were: X-£10,000; Y-£20,000. X sells for £10.00 per unit; Y sells for £7.50 per unit.
Refer to Figure 6-4. What is the gross profit of product Y assuming the physical units method is used?

A) £25,000
B) £-0-
C) £10,000
D) £15,000

Question 29

Figure 6-4
Deli Products produces two products, X and Y, in a single process. In 2011, the joint costs of this process were £25,000. In addition, 4,000 units of X and 6,000 units of Y were produced. Separable processing costs beyond the split-off point were: X-£10,000; Y-£20,000. X sells for £10.00 per unit; Y sells for £7.50 per unit.
Refer to Figure 6-4. What is the gross profit of product Y assuming the net realizable value method is used?

A) £13,636
B) £16,364
C) £30,000
D) £45,000

Question 30

Figure 6-6
Suppose that a sawmill processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of £300,000:
Refer to Figure 6-6. What amount of joint costs will be allocated to No. 2 common using the constant gross margin percentage method?

A) £300,000
B) £37,800
C) £67,200
D) £192,000

Question 31

The decision of whether or NOT to process joint products beyond their split-off point is

A) based on the total cost of the finished product including joint costs.
B) based on joint costs only.
C) based on selling price at split-off point.
D) based on additional revenues versus additional costs of processing further.

Question 32

Figure 6-6
Suppose that a sawmill processes logs into four grades of lumber totaling 500,000 board feet as follows at a joint cost of £300,000:

-Refer to Figure 6-6. No. 2 common can be cut into 2 * 4s. The final sales value will increase to £150,000. The cost of cutting No. 2 common is £15,000. Should the No. 2s be cut into 2 * 4s?

A) Sell now.
B) Cut into 2 * 4s; profits will increase £30,000.
C) Cut into 2 * 4s; profits will increase £45,000.
D) Cut into 2 * 4s; profits will increase £150,000.

Question 33

Figure 6-7
Suppose that a concrete manufacturer produces four grades of concrete totaling 500,000 cubic yards as follows at a joint cost of £2,000,000:
Refer to Figure 6-7. What is the gross profit of Grade D if the constant gross margin percentage method is used?

A) £306,000
B) £1,125,000
C) £544,000
D) £900,000

Question 34

Figure 6-8
James Ltd. produces three products in a joint process: A, B, and C. The joint costs are as follows: The split-off values for A, B, and C are £80,000, £100,000, and £60,000, respectively. If management processes the three products beyond the split-off point, sales values for A, B, and C would increase to £150,000, £130,000, and £120,000, respectively. In order to process the products further, the company must incur separable costs of £14,000, £12,000, and £10,000 for products A, B, and C, respectively. James uses the sales-value-at-split-off method to allocate joint costs.
Refer to Figure 6-8. Should James Ltd. process B further?

A) Process further; profits will increase £30,000.
B) Process further; profits will increase £98,000.
C) Process further; profits will increase £18,000.
D) Sell now.

Question 35

Which of the following costs is NOT relevant to a decision to sell a product at split-off or to process the product further and then sell the product?

A) the joint costs allocated to the product
B) the selling price of the product at split-off
C) the additional processing costs after split-off
D) the selling price of the product after further processing

Question 36

Figure 6-5
Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs £50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of £60 per unit and £40 per unit for Dulls. The market price is £250 for Brights and £200 for Dulls.
Refer to Figure 6-5. What is the gross profit for Dulls assuming the constant gross margin percentage method is used?

A) £120,000
B) £150,000
C) £37,500
D) £200,000

Question 37

Figure 6-5
Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs £50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of £60 per unit and £40 per unit for Dulls. The market price is £250 for Brights and £200 for Dulls.
Refer to Figure 6-5. What is the amount of joint costs allocated to Brights using the net realizable value method?

A) £50,000
B) £11,906
C) £-0-
D) £11,446

Question 38

Figure 6-7
Suppose that a concrete manufacturer produces four grades of concrete totaling 500,000 cubic yards as follows at a joint cost of £2,000,000:
Refer to Figure 6-7. What amount of joint costs will be allocated to Grade B using the final sales value method?

A) £2,000,000
B) £768,000
C) £800,000
D) £240,000

Question 39

Figure 6-5
Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs £50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of £60 per unit and £40 per unit for Dulls. The market price is £250 for Brights and £200 for Dulls.
Refer to Figure 6-5. What is the gross profit for Brights assuming the physical units method is used?

A) £62,500
B) £12,500
C) £47,500
D) £37,500

Question 40

Figure 6-5
Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run costs £50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be processed past the split-off point, incurring separable costs for Brights of £60 per unit and £40 per unit for Dulls. The market price is £250 for Brights and £200 for Dulls.
Refer to Figure 6-5. What is the amount of joint costs allocated to Dulls using the constant gross margin percentage method?

A) £15,000
B) £40,000
C) £50,000
D) £10,000

Question 41

Figure 6-11
Information about three joint products follows: The cost of the joint process is £140,000.
Refer to Figure 6-11. Assuming all of the sell now or process further decisions were correctly made, what will be the firm's income?

A) £736,000
B) £654,000
C) £596,000
D) £610,000

Question 42

Ottawa Ltd. produces two products from a joint process. Information about the two joint products is as follows: The cost of the joint process is £85,000.
Refer to Figure 6-12. Which of Ottawa's joint products should be processed further?

A) Product X only
B) Product Y only
C) both Product X and Product Y
D) neither Product X nor Product Y

Question 43

Figure 6-9
Stars Manufacturing Company produces Products A1, B2, C3, and D4 through a joint process. The joint costs amount to £200,000.
Refer to Figure 6-9. If Product B2 is processed further, profits will

A) increase by £30,000.
B) decrease by £3,000.
C) increase by £32,000.
D) increase by £2,000.

Question 44

Figure 6-10
Manning Company uses a joint process to produce products W, X, Y, and Z. Each product may be sold at its split-off point or processed further. Additional processing costs of specific products are entirely variable. Joint processing costs for a single batch of joint products are £120,000. Other relevant data are as follows:
Refer to Figure 6-10. Processing Y further will cause profits to

A) increase by £120,000.
B) increase by £52,000.
C) increase by £68,000.
D) decrease by £32,000.

Question 45

Lake Ltd. manufactures two products, AA and BB, from a joint process. A production run costs £20,000 and results in 500 units of AA and 2,000 units of BB. Both products must be processed past the split-off point, incurring separable costs of £5 per unit for AA and £10 per unit for BB. The market price is £25 for AA and £20 for BB.
Required:
a.
Allocate joint production costs to each product using the physical units method.
b.
Allocate joint production costs to each product using the net realizable value method.
c.
Allocate joint production costs to each product using the constant gross margin percentage method.

Question 46

Moore Manufacturing Company makes two products from a common input. Joint processing costs up to the split-off point total £23,400. The company allocates the joint costs to the products on the basis of their total sales values at split-off. The total sales value at split-off for both products is the same. Each product may be sold at the split-off point or processed further. Data concerning one of these products are as follows: What is the minimum amount the company would accept for this product if it is to be sold at the split-off point?

A) £10,000
B) £21,700
C) £20,000
D) £26,700

Question 47

Mickey Company manufactures three joint products: X, Y, and Z. The cost of the joint process is £30,000. Information about the three products follows: Required:
a.
Determine whether each product should be sold at split-off or processed further. Show all supporting calculations in good form.
b.
Determine the firm's income if the firm processed all three products beyond split-off.

Question 48

Anderson Company pays a flat fee of £500 for the right to retrieve stray golf balls from lakes and ponds at golf and country clubs. The recovered balls are then cleaned, graded as to quality (birdie, bogey, or duffer), and sold to sporting goods stores at the following prices per dozen: birdie quality, £5; bogey quality, £4; and duffer quality, £3. Last month £8,000 of cost was incurred retrieving the following quantities of golf balls: birdie quality, 1000 dozen; bogey quality, 3,000 dozen; and duffer quality, 2,000 dozen.
Required:
(Calculate relative quantity to three decimal points.)
a.
Determine the cost and gross profit per cent for each type of golf ball using the physical units method of joint cost allocation.
b.
Repeat part (a) using the sales-value-at-split-off method of joint cost allocation.
c.
The company has an opportunity to sell bogey quality balls for £4.50 per dozen to a company that operates golf driving ranges; however, the balls will have to be painted and striped. The company estimates that the cost of painting and striping will be 60 cents per dozen. Assuming the physical unit method is used to allocate joint costs, should the offer be accepted?

Question 49

Figure 6-11
Information about three joint products follows: The cost of the joint process is £140,000.
Refer to Figure 6-11. Which of the joint products should be processed further?

A) X
B) Y
C) Z
D) both X and Y

Question 50

Ottawa Ltd. produces two products from a joint process. Information about the two joint products is as follows: The cost of the joint process is £85,000.
Refer to Figure 6-12. Which of Ottawa's joint products should be sold at split-off?

A) Product X only
B) Product Y only
C) both Product X and Product Y
D) neither Product X nor Product Y

Question 51

Ottawa Ltd. produces two products from a joint process. Information about the two joint products is as follows: The cost of the joint process is £85,000.
Refer to Figure 6-12. Ottawa currently sells both products at the split-off point. If Ottawa makes decisions that maximize profit, Ottawa's profit will increase by

A) £16,000.
B) £4,000.
C) £50,000.
D) £10,000.

Question 52

Park Company produces three products in a joint process: A, B, and C. The joint costs are described as follows: The split-off values for A, B, and C are £100,000, £120,000 and £80,000, respectively. If management processes A beyond the split-off point, the sales value of A would increase to £150,000. In order to process A further, the company must rent another facility for £24,000, as well as incur additional materials and labour costs equal to £15,000.
Required:
a.
What is the amount of joint costs allocated to products A, B, and C if the sales value at split-off value method is used?
b.
Should the division process A further or sell it at split-off? What is the effect of the decision on gross profit?

Question 53

Maxwell Company manufactures two products from a joint process. Information about the two joint products is as follows: The cost of the joint process is £1,500,000.
Required:
a.
Which of Maxwell's joint products should be processed further?
b.
Assume that Maxwell currently sells both products at the split-off point. What is Maxwell's income?
c.
Assume that Maxwell makes decisions about its joint products that maximize profit. What is Maxwell's income?

Question 54

Arcadia, SA, uses a joint process to produce Products W, X, Y, Z. Each product may be sold at its split-off point or processed further. Additional processing costs of specific products are entirely variable. Joint processing costs for a single batch of joint products are £200,000. Other relevant data are as follows: Required:
a.
Determine which products should be processed further.
b.
How will processing each product further affect profits?

Question 55

Information about three joint products follows: The cost of the joint process is £60,000. Which of the joint products should be sold at split-off?

A) A
B) B
C) C
D) both A and B

Question 56

Figure 6-10
Manning Company uses a joint process to produce products W, X, Y, and Z. Each product may be sold at its split-off point or processed further. Additional processing costs of specific products are entirely variable. Joint processing costs for a single batch of joint products are £120,000. Other relevant data are as follows:
Refer to Figure 6-10. Which products should Manning process further?

A) all
B) all except Z
C) Y and X
D) none

Question 57

Figure 6-9
Stars Manufacturing Company produces Products A1, B2, C3, and D4 through a joint process. The joint costs amount to £200,000.
Refer to Figure 6-9. Which product(s) should be sold at split-off to maximize profits in the short run?

A) Product A1
B) Product D4
C) Product B2
D) Products A1 and D4

Question 58

Figure 6-11
Information about three joint products follows: The cost of the joint process is £140,000.
Refer to Figure 6-11. If the firm is currently processing all three products beyond split-off, the firm's income would be

A) £736,000.
B) £654,000.
C) £596,000.
D) £514,000.

Question 59

Nelson SA. obtains two products and a by-product from its production process. By-product revenues are treated as other income and a noncost approach is used to assign costs to them. During the period, 1,200 units were processed at a cost of £12,000 for materials and conversion costs, resulting in the following: Required:
a.
Account for all costs using a physical basis for allocation.
b.
Account for all costs using net realizable value as the basis for allocation.
c.
Account for all costs using final sales value as the basis for allocation.
d.
How much joint costs should be allocated to the by-product?

Question 60

Which of the following costs is NOT relevant to a decision to sell a product at split-off or process the product further and then sell the product?

A) joint costs allocated to the product
B) the selling price of the product at split-off
C) the additional processing costs after split-off
D) the selling price of the product after further processing

Question 61

Jazzmyne Company manufactures two products from a joint process. Information about the two joint products is as follows: The cost of the joint process is £1,750,000.
Required:
a.
Which of Jazzmyne's joint products should be processed further?
b.
Assume that Jazzmyne currently sells both products at the split-off point. What is Jazzmyne's income?
c.
Assume that Jazzmyne makes decisions about its joint products that maximize profit. What is Jazzmyne's income?