Deck 9: Joint-Process Costing

Question 1

An intermediate product is a product that might require further processing before it is salable to the ultimate consumer, either by the producer or by another processor.

Answer 1

True

Question 2

A joint process simultaneously converts a common input into several outputs.

Answer 2

True

Question 3

The net realizable value (NRV) of a product is its sales revenue less all allocated costs.

Answer 3

False

Question 4

The net realizable value (NRV) us a measure of a product's contribution to profit before the split-off-point.

Question 5

Joint costs are irrelevant in a sell-or-process-further decision.

Question 6

Costs incurred before the split-off point should be allocated to products according to sales revenue to determine whether products should be sold at the split-off point or processed further.

Question 7

Joint costs should never be allocated to final products, since they cannot be easily identified as to which product caused the cost.

Question 8

Allocated joint costs may make some products appear unprofitable even if they have positive sales value after split off.

Question 9

Only the revenues from selling or processing a product beyond the split-off-point and any expenditures from additional processing are relevant factors in deciding whether to process a product beyond the split-off point.

Question 10

Manufacturing companies are required to use joint-cost allocation for both financial accounting and tax purposes.

Question 11

Determining exactly how much of a joint product resource is used by any of the joint products is impossible.

Question 12

Because joint-cost allocation is always arbitrary, it is excluded from consideration in determining casualty losses for insurance purposes.

Question 13

By-products are outputs from a joint production process that are minor in quantity and/or net realizable value when compared to main products.

Question 14

Because they are immaterial in value, by-products should never receive more than 10% of the allocation of joint product costs.

Question 15

The net realizable value (NRV) method allocates joint costs based on the net realizable value of the byproducts and main products at split-off.

Question 16

The net realizable value (NRV) of a product is the difference between its joint costs up to the split-off point and additional processing costs after split-off.

Question 17

The net realizable value method preserves the relative profitability of joint products.

Question 18

The gross margin percentage of joint products using the net realizable value method will not exactly be equal due to further processing costs.

Question 19

Companies prefer the physical-measures method of allocating joint costs when product prices are stable and predictable.

Question 20

The physical-measure method of allocating joint costs is based on the relative volumes, weights, energy contents or another physical-measure of joint products at the split-off point.

Question 21

The final sales total of each product would be an appropriate way to allocate joint costs using the physical-measure method.

Question 22

A disadvantage of the net realizable value (NRV) method is that it can distort the profitability of a product.

Question 23

The physical-measures method of allocating joint costs can sometimes distort the profitability of products.

Question 24

Regardless of the method of allocation of joint costs, total production costs and cost of goods sold remain the same.

Question 25

If a company uses the net realizable value method and has further processing costs that are equal in dollars for all joint products, then the gross margin as a percentage of sales will be equal for all the joint products with common joint costs.

Question 26

If a company uses the net realizable value method and has further processing costs that are equal percentages of the final sales value for all the joint products, then the gross margin as a percent of sales will be equal for all the joint products with common joint costs.

Question 27

The physical-quantities method of assigning costs may provide a reasonable basis for joint cost allocation as long as the physical measures reflect economic value.

Question 28

If a company uses the physical measures method of allocating joint costs, the gross margin as a percent of sales will always be equal for all joint products with common joint costs.

Question 29

A product will have a negative net realizable value if costs of further processing exceed sales value.

Question 30

If by-product costs are immaterial, it is acceptable to expense their cost in the period incurred even though this violates the matching principle.

Question 31

Two standard measures of accounting for by-products that are sold at the split-off point are to consider by-product net realizable value as other revenue or deduct by-product net realizable value from cost of goods sold.

Question 32

By-products can occur before the split-off point, at the split-off point or after the split-off point.

Question 33

Accounting for by-products seeks to accurately record transactions at minimum effort and cost.

Question 34

The constant gross margin percentage method is based on the physical measures of joint products.

Question 35

The constant gross margin percentage method results in the same gross margin in dollars for all joint products.

Question 36

The first step in the constant gross margin percentage method is to compute the total gross margin percentage of all products.

Question 37

The net realizable value method results in gross margin percentages that are equal as a percent of the net realizable value of each product, while the constant gross margin percentage requires that gross margin percentages be equal as a percent of the revenues of the joint products.

Question 38

A product's net realizable value is calculated by:

A) Deducting the cost of goods sold from the sales revenue
B) Deducting the allocated joint costs and processing costs after split-off from the sales revenue
C) Deducting unit-level costs from the sales revenue
D) Deducting processing costs after split-off from the sales revenue

Question 39

Great Sweets Candy Company's management makes processing decisions that will result in the maximum possible profits to the company, the company's monthly profits will be:

A) $562,500
B) $570,000
C) $1,062,500
D) $1,070,000

Question 40

Which of the following statements regarding joint cost allocation isFalse?

A) There is no precise way to trace joint-process costs to joint product
B) Manufacturing companies are required to use joint-cost allocations for financial accounting and tax . reporting purposes to value inventories
C) Joint costs should not be allocated to products in estimating casualty losses because such allocation is too arbitrary in nature
D) Improper management decisions can result if managers regard average joint costs per unit as unit-level or marginal costs

Question 41

Use the following to answer questions:
Gardner Company processes products in a joint processing operation that produces products A and B in a joint process. The company incurs $1,200,000 of joint processing costs monthly. Currently, 3,600 of A and 2,800 of B are being produced each month. Management plans to decrease B's production by 600 units in order to increase the production of A by 1,000 units. Additionally, this change will require minor modifications which will add $40,000 to the production costs. This cost is entirely attributable to product B

-What is the amount of the joint costs allocable to A before the changes are made to the existing production process, assuming Gardner allocates its joint costs according to the proportion of A and B produced?

A) $675,000
B) $547,058
C) $529,412
D) $525,000

Question 42

Use the following to answer questions:
Gardner Company processes products in a joint processing operation that produces products A and B in a joint process. The company incurs $1,200,000 of joint processing costs monthly. Currently, 3,600 of A and 2,800 of B are being produced each month. Management plans to decrease B's production by 600 units in order to increase the production of A by 1,000 units. Additionally, this change will require minor modifications which will add $40,000 to the production costs. This cost is entirely attributable to product B

-What is the new unit-cost of Product B if the changes are made, assuming the physical-measures method of allocating joint costs is used?

A) $201. 78
B) $194. 65
C) $206. 89
D) $224. 52

Question 43

What are the joint costs allocated to products A and B assuming Whitney Smith uses the net-realizable-value approach?

WhitneySmithCompany makes two products: X and Y. They are initially processed from the same raw material and than, after split off, further processed separately. Additional information is as follows:

A) Item A
B) Item B
C) Item C
D) Item D

Question 44

Which of the following would not be a physical measure used to allocate joint costs?

A) Number of pounds produced
B) Cubic feet of gas produced
C) Sales value at split off
D) Energy content (BTUs)

Question 45

Use the following to answer questions:
Glenwilliams Lumber Company manufactures 3 products: Poplar, Birch, and Pine from a joint process. Joint-process costs in 2007 were $3,000,000. Additional information regarding the three products is as follows:


-Assuming that joint-product costs are allocated using the physical-measures method, what were the total costs of Pine?

A) $7,500,000
B) $1,500,000
C) $3,000,000
D) $6,000,000

Question 46

Use the following to answer questions:
Glenwilliams Lumber Company manufactures 3 products: Poplar, Birch, and Pine from a joint process. Joint-process costs in 2007 were $3,000,000. Additional information regarding the three products is as follows:


-Assuming that joint-product costs are allocated using the net-realizable-value method, what were the total costs of Birch?

A) $10,545,455
B) $ 511,500
C) $10,511,500
D) $10,000,000

Question 47

Use the following to answer questions:
Glenwilliams Lumber Company manufactures 3 products: Poplar, Birch, and Pine from a joint process. Joint-process costs in 2007 were $3,000,000. Additional information regarding the three products is as follows:


-Based on the cost information provided, Poplar should be:

A) Sold at the split-off point
B) Processed further for an incremental profit of $4,000,000
C) Processed further for an incremental profit of $2,000,000
D) Either be sold at split-off point or processed further, depending upon how joint product costs are allocated

Question 48

Which of the following statements is true?

A) Joint costs are allocated to both main products and by-products
B) Joint costs are allocated only to by-products
C) Joint costs are not allocated because they cannot be attributed to specific units of output
D) Joint costs are allocated only to main products

Question 49

Companies may prefer the physical-measures method of joint cost allocation when:

A) They do not wish to distort the profitability of products
B) Each product's gross margin will contribute approximately the same percentage to the overall gross margin
C) When there are no by-products
D) When regulators set prices in regulated pricing situations

Question 50

Which of the following statements regarding the physical-measures method of allocating joint-product costs is false?

A) Joint product costs are allocated proportional to economic values
B) It is based on the relative volume, weight, or other physical measure of each joint product at the split-off point
C) It is preferred when prices of output products are highly volatile or unpredictable
D) The total profit of the company will be the same regardless of which physical measure is used to allocated joint-product costs

Question 51

Use the following to answer questions:
SimpsonSpring Corporation manufactures products J, K and L from a joint process. Additional information is as follows:

Total joint costs of $120,000 were incurred on the three products

-Assuming that joint product costs are allocated using the net-realizable-value at split-off, what joint costs were allocated to the three products?

A) Item A
B) Item B
C) Item C
D) Item D

Question 52

Use the following to answer questions:
SimpsonSpring Corporation manufactures products J, K and L from a joint process. Additional information is as follows:

Total joint costs of $120,000 were incurred on the three products

-Product J should be:

A) Sold at split-off
B) Processed further for an additional profit of $6,000
C) Dropped from the product line because it shows an overall loss
D) Processed further for an additional profit of $126,000

Question 53

Use the following to answer questions:
SimpsonSpring Corporation manufactures products J, K and L from a joint process. Additional information is as follows:

Total joint costs of $120,000 were incurred on the three products

-Without regard to your previous answers, assume that the joint costs allocated to product L were $20,000. Product L should be:

A) Sold at split-off
B) Processed further
C) Sold as a by-product
D) More information is needed before a decision can be made

Question 54

Use the following to answer questions:
SimpsonSpring Corporation manufactures products J, K and L from a joint process. Additional information is as follows:

Total joint costs of $120,000 were incurred on the three products

-The joint-costs allocated to each product using the physical-measures method of cost allocation would be:

A) Item A
B) Item B
C) Item C
D) Item D

Question 55

Use the following to answer questions:
SimpsonSpring Corporation manufactures products J, K and L from a joint process. Additional information is as follows:

Total joint costs of $120,000 were incurred on the three products

-If the decision is made that will maximize company profits and if joint costs are allocated using physical-measures, product L will show a gross margin of:

A) $12,857
B) $34,000
C) $16,857
D) $14,571

Question 56

Use the following to answer questions:
SimpsonSpring Corporation manufactures products J, K and L from a joint process. Additional information is as follows:

Total joint costs of $120,000 were incurred on the three products

-Regarding a decision to sell products J and L at split-off or process them further, the company should:

A) Sell both at the split-off point
B) Process both further
C) Sell J at the split-off point and process L further
D) Sell L at the split-off and process K further

Question 57

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

A) If all products are sold in the same period as they are produced, treating by-product revenue as other revenue will result in a higher overall gross margin
B) If all products are sold in the same period as they are produced, treating by-product net-realizable-value as a deduction of the cost of the main products will result in a higher overall gross margin
C) If all products are sold in the same period as they are produced, total reported revenues will be the same regardless of how by-product revenue is accounted for
D) If all products are sold in the same period as they are produced, the reported gross margin will be the same regardless of how by-product revenue is accounted for

Question 58

Use the following to answer questions:
KeithManufacturing produced three products in a joint operation. Joint costs up to the split off point were $150,000. Products H and I were processed further. Additional information is as follows:


-If the net-realizable-value method is used and product J is accounted for as a joint product, how much of the joint-costs would be allocated to Product H?

A) $106,350
B) $106,250
C) $107,143
D) $ 98,078

Question 59

Use the following to answer questions:
KeithManufacturing produced three products in a joint operation. Joint costs up to the split off point were $150,000. Products H and I were processed further. Additional information is as follows:


-Assume the relative sales value at split-off method is used and that product J is accounted for as a joint product, how much of the joint-costs would be allocated to product I?

A) $80,690
B) $42,000
C) $65,000
D) $39,000

Question 60

In joint-process costing and analysis, which of the following costs is relevant when deciding the point at which a product should be sold to maximize profits?

A) The cost of the machinery used to produce the three products
B) The salaries of production personnel making the product
C) The cost of the materials required for the joint products
D) The selling price if the products are processed further

Question 61

In joint-process costing and analysis, which of the following costs would not be relevant when deciding the point at which a product should be sold to maximize profits?

A) The cost of the machinery used to produce the three products
B) The selling price at the split off point
C) The additional processing costs
D) The selling price if the product is processed further

Question 62

Use the following to answer questions:
Cahill Lumber manufactures mulch and wood bark from a joint processing operation using wood as the raw material. For a recent month, 8,000 pounds of mulch were produced having a sales value after split-off point of $21,000. 4,000 pounds of wood bark were produced having a sales value after split-off of $14,000. Using the net- realizable-value method, the portion of the total joint product costs allocated to mulch was $12,000. (CPA adapteD

-The amount of joint costs allocated to wood bark using the net-realizable-value method would be:

A) $18,000
B) $13,000
C) $8,000
D) $3,000

Question 63

Use the following to answer questions:
Cahill Lumber manufactures mulch and wood bark from a joint processing operation using wood as the raw material. For a recent month, 8,000 pounds of mulch were produced having a sales value after split-off point of $21,000. 4,000 pounds of wood bark were produced having a sales value after split-off of $14,000. Using the net- realizable-value method, the portion of the total joint product costs allocated to mulch was $12,000. (CPA adapteD

-If the physical-measures method of allocation were used, the amount of joint costs allocated to mulch would be:

A) $6,000
B) $6,667
C) $20,000
D) $13,333

Question 64

Use the following to answer questions:
Rhone Corporation produces a product called Sharone, which gives rise to a by-product called Erone. The only costs associated with Erone are additional processing costs of $2 for each unit. Rhone accounts for Erone's sales first by deducting its separable costs from its sales and then by deducting this net amount from the cost of goods sold of Sharone. This year, 4,800 units of Erone were produced. They were all sold for $10 each. Company operating expenses were $120,000 for the year. Sales revenue and cost of goods sold for Sharone were $800,000 and $400,000, respectively, for the year. (CPA adapteD

-Under the existing method of accounting for Erone, what is Rhone's gross margin?

A) $400,000
B) $218,400
C) $361,600
D) $438,400

Question 65

Use the following to answer questions:
Rhone Corporation produces a product called Sharone, which gives rise to a by-product called Erone. The only costs associated with Erone are additional processing costs of $2 for each unit. Rhone accounts for Erone's sales first by deducting its separable costs from its sales and then by deducting this net amount from the cost of goods sold of Sharone. This year, 4,800 units of Erone were produced. They were all sold for $10 each. Company operating expenses were $120,000 for the year. Sales revenue and cost of goods sold for Sharone were $800,000 and $400,000, respectively, for the year. (CPA adapteD

-If Rhone changes its method of accounting for Erone's sales by showing the net amount as "other revenue,"
Rhone's gross margin would be:

A) $400,000
B) $318,400
C) $438,400
D) $361,600

Question 66

Use the following to answer questions:
Rhone Corporation produces a product called Sharone, which gives rise to a by-product called Erone. The only costs associated with Erone are additional processing costs of $2 for each unit. Rhone accounts for Erone's sales first by deducting its separable costs from its sales and then by deducting this net amount from the cost of goods sold of Sharone. This year, 4,800 units of Erone were produced. They were all sold for $10 each. Company operating expenses were $120,000 for the year. Sales revenue and cost of goods sold for Sharone were $800,000 and $400,000, respectively, for the year. (CPA adapteD

-If Rhone changes its method of accounting for Erone's sales, assuming that all of Erone's production is sold in the period that it is produced, what would be the effect on Rhone's overall profits?

A) Overall profit would increase
B) Overall profit would decrease
C) Overall profit would remain the same
D) Additional information is needed to determine the effect on overall profit

Question 67

Sell-or-process-further decisions based on gross margin per unit:

A) Provide the same contribution to profit as using the net-realizable-value method
B) May resemble the net-realizable-value per unit if physical quantities are positively related to the net-. realizable- value and further processing costs are similar across joint product alternatives
C) Provide the same contribution to profit as using the physical quantities method
D) Should never be used

Question 68

Use the following to answer questions:
The Stanford Corporation produces three outputs: A, B and C from one input. The net-realizable-value of A at the split-off point is $200,000. The net-realizable-value of B at the split-off point is $400,000 and the net-realizable- value of C at the split-off is $50,000. Final sales values are $400,000, $600,000 and $50,000 for A, B and C respectively. However, these prices are subject to erratic change. The additional processing costs for A, B and C are $100,000, $150,000 and $0 respectively. Stanford produces 120,000 units of A, 120,000 units of B and 60,000 units of C. The total costs incurred up to the split-off point are $300,000

-Which allocation method would be best for Stanford to use?

A) Gross margin method
B) Net-realizable-value method
C) Physical quantities method
D) By-product method

Question 69

Use the following to answer questions:
The Stanford Corporation produces three outputs: A, B and C from one input. The net-realizable-value of A at the split-off point is $200,000. The net-realizable-value of B at the split-off point is $400,000 and the net-realizable- value of C at the split-off is $50,000. Final sales values are $400,000, $600,000 and $50,000 for A, B and C respectively. However, these prices are subject to erratic change. The additional processing costs for A, B and C are $100,000, $150,000 and $0 respectively. Stanford produces 120,000 units of A, 120,000 units of B and 60,000 units of C. The total costs incurred up to the split-off point are $300,000

-If the net-realizable-value method is used and product C is accounted for as a joint-product, what amount of joint- costs should be allocated to product A?

A) $112,500
B) $114,286
C) $120,000
D) $168,750

Question 70

Use the following to answer questions:
The Stanford Corporation produces three outputs: A, B and C from one input. The net-realizable-value of A at the split-off point is $200,000. The net-realizable-value of B at the split-off point is $400,000 and the net-realizable- value of C at the split-off is $50,000. Final sales values are $400,000, $600,000 and $50,000 for A, B and C respectively. However, these prices are subject to erratic change. The additional processing costs for A, B and C are $100,000, $150,000 and $0 respectively. Stanford produces 120,000 units of A, 120,000 units of B and 60,000 units of C. The total costs incurred up to the split-off point are $300,000

-If the net-realizable-value method is used and product C is accounted for as reduction of joint costs, what amount of joint- costs should be allocated to product B?

A) $100,000
B) $118,750
C) $150,000
D) $168,750

Question 71

Use the following to answer questions:
The Stanford Corporation produces three outputs: A, B and C from one input. The net-realizable-value of A at the split-off point is $200,000. The net-realizable-value of B at the split-off point is $400,000 and the net-realizable- value of C at the split-off is $50,000. Final sales values are $400,000, $600,000 and $50,000 for A, B and C respectively. However, these prices are subject to erratic change. The additional processing costs for A, B and C are $100,000, $150,000 and $0 respectively. Stanford produces 120,000 units of A, 120,000 units of B and 60,000 units of C. The total costs incurred up to the split-off point are $300,000

-If the physical-measures method is used and product C is accounted for as a by-product whose income is credited to the joint costs of production, what amount of joint-costs should be allocated to product A?

A) $93,750
B) $100,000
C) $125,000
D) $130,000

Question 72

Use the following to answer questions:
The Stanford Corporation produces three outputs: A, B and C from one input. The net-realizable-value of A at the split-off point is $200,000. The net-realizable-value of B at the split-off point is $400,000 and the net-realizable- value of C at the split-off is $50,000. Final sales values are $400,000, $600,000 and $50,000 for A, B and C respectively. However, these prices are subject to erratic change. The additional processing costs for A, B and C are $100,000, $150,000 and $0 respectively. Stanford produces 120,000 units of A, 120,000 units of B and 60,000 units of C. The total costs incurred up to the split-off point are $300,000

-If the physical-quantities method is used and product C is accounted for as a joint product, what amount of joint costs will be allocated to product B?

A) $100,000
B) $120,000
C) $130,000
D) $150,000

Question 73

Use the following to answer questions:
The Stanford Corporation produces three outputs: A, B and C from one input. The net-realizable-value of A at the split-off point is $200,000. The net-realizable-value of B at the split-off point is $400,000 and the net-realizable- value of C at the split-off is $50,000. Final sales values are $400,000, $600,000 and $50,000 for A, B and C respectively. However, these prices are subject to erratic change. The additional processing costs for A, B and C are $100,000, $150,000 and $0 respectively. Stanford produces 120,000 units of A, 120,000 units of B and 60,000 units of C. The total costs incurred up to the split-off point are $300,000

-What is the expected gross margin for Stanford Corporation?

A) $350,000
B) $450,000
C) $500,000
D) The expected gross margin cannot be determining without knowing how joint-costs will be allocated

Question 74

In the sequence of decisions involved in the management of joint processes, which decision should be made first?

A) Deciding whether each product should be sold at split-off or processed further
B) Deciding how to allocate joint product costs
C) Deciding on the final selling price of each product
D) Deciding which products to produce

Question 75

When multiple products are produced in a joint-process, which of the following distinguishes main products from by-products?

A) The final selling price
B) The amount of hours needed to produce each product
C) The number of units produced
D) The net realizable value at the split-off point

Question 76

Net realizable value at split-off is used to allocate:

A) Item A
B) Item B
C) Item C
D) Item D

Question 77

Which of the following would not be a joint-product cost?

A) Cost of picking apples to be processed into cider and applesauce in a cider factory
B) Cost of cinnamon used in applesauce
C) Cost of maintaining oil rigs for an oil manufacturer
D) Costs of running a fishing boat that sells haddock, cod, and lobsters to wholesalers

Question 78

Richards Manufacturing Corporation manufactures three products in a joint process. Additional information is as follows
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.

Question 79

Colbert Corporation produces a product called Spots are Out, which gives rise to a byproduct called Sunshine. The only costs associated with Sunshine are additional processing costs of $4 for each unit. Colbert accounts for Sunshine's sales first by deducting its separable costs from its sales and then by deducting this net amount from the cost of sales of Spots are Out. This year, 9,600 units of Sunshine 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 Spots are Out were $1,600,000 and $800,000 respectively. (CPA AdapteD.
(a) Calculate the company's gross margin under the current accounting method.
(b) Assume the company changes its accounting method and accounts for the byproduct'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?

Question 80

Misty Manufacturing produced three products in a joint operation. Products O and P were processed further. Product Q was sold at the split-off point. Additional information is as follows:

Required:Allocate the joint costs using the net-realizable-value method , accounting for Product Q as a joint product.