Question 1

Woody City Manufacturing mills lumber for companies who manufacture furniture.The main product is finished lumber with a byproduct of wood shavings.The byproduct is sold to plywood manufacturers.For July,the manufacturing process incurred $412,000 in total costs.Eighty thousand board feet of lumber were produced and sold along with 7,000 pounds of shavings.The finished lumber sold for $6.00 per board foot and the shavings sold for $0.60 a pound.There were no beginning or ending inventories.
Required:
Prepare an income statement showing the byproduct (1)as a cost reduction during production,and (2)as a revenue item when sold.

Accepted Answer

The answer of Woody City Manufacturing mills lumber for companies...

Question 2

Discuss in brief how easy it is for companies to classify products as main products,joint products,and byproducts.

Accepted Answer

The answer of Discuss in brief how easy it is...

Question 3

Joint processing costs are relevant in deciding whether to process the product further.

Accepted Answer

A) True 
 B)False

Question 4

One of the reasons to allocate joint costs to individual products is to have costs reimbursed under a federal cost=plus contract.

Accepted Answer

A) True 
 B)False

Question 5

In joint costing,the sales value at split-off method allocates joint costs entirely to joint products sold during the accounting period on the basis of the relative total sales value at the split-off point.

Accepted Answer

A) True 
 B)False

Question 6

The Brital Company processes unprocessed milk to produce two products,Butter Cream and Condensed Milk.The following information was collected for the month of June:

The costs of purchasing the of unprocessed milk and processing it up to the split-off point to yield a total of 33,000 gallons of saleable product was $55,000.
The company uses constant gross-margin percentage NRV method to allocate the joint costs of production.Which of the following statements is true of Brital?

Accepted Answer

A) The gross profit percent of condensed milk is lower than the gross profit of butter cream. 
B) The gross margin is same for both products because constant gross margin percentage NRV method ignores profits earned before the split-off point. 
C) The gross profit of condensed milk is lower than the gross profit of butter cream. 
D) The gross margin is allocated to the joint products in order to determine the joint-cost allocations.

Question 7

The net realizable value (NRV)method method allocates joint costs to joint products produced during the accounting period in such a way that each individual product achieves an identical gross-margin percentage.

Accepted Answer

A) True 
 B)False

Question 8

New York Liberty Corporation makes miniature statues of the Empire State Building from cast iron.Sales total 50,000 units a year.The statues are finished either rough or polished,with an average demand of 60% rough and 40% polished.Iron ingots,the direct material,costs $5 per pound.Processing costs are $300 to convert 30 pounds into 60 statues.Rough statues are sold for $17 each,and polished statues can be sold for $19 or engraved for an additional cost of $5.Polished statues can then be sold for $32.
Required:
Determine whether New York Liberty Company should sell the engraved statutes.Why?

Accepted Answer

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Question 9

Bismite Corporation purchases trees from Cheney lumber and processes them up to the split-off point where two products (paper and pencil casings)emerge from the process.The products are then sold to an independent company that markets and distributes them to retail outlets.The following information was collected for the month of October:

The cost of purchasing 270 trees and processing them up to the split-off point to yield 180,000 sheets of paper and 180,000 pencil casings is $15,000.
Bismite's accounting department reported no beginning inventory.
What are the paper's and the pencil's approximate weighted cost proportions using the sales value at
Split-off method,respectively?

Accepted Answer

A) 50.00% and 50.00% 
B) 45.06% and 54.94% 
C) 48.54% and 51.46% 
D) 46.51% and 53.49%

Question 10

The Green Company processes unprocessed goat milk up to the split-off point where two products,condensed goat milk and skim goat milk result.The following information was collected for the month of October:

The costs of purchasing the of unprocessed goat milk and processing it up to the split-off point to yield a total of 104,000 gallons of saleable product was $186,480.There were no inventory balances of either product.Condensed goat milk may be processed further to yield 45,000 gallons (the remainder is shrinkage)of a medicinal milk product,Xyla,for an additional processing cost of $4 per usable gallon.Xyla can be sold for $19 per gallon.
Skim goat milk can be processed further to yield 57,200 gallons of skim goat ice cream,for an additional processing cost per usable gallon of $4.The product can be sold for $9 per gallon.
There are no beginning and ending inventory balances.
Using estimated net realizable value,what amount of the joint costs would be allocated Xyla and the skim goat ice cream? (Round intermediary percentage calculations to the nearest hundredth. )

Accepted Answer

A) $675,000 and $286,000 
B) $130,984 and $55,496 
C) $93,240 and $93,240 
D) $86,448 and $100,032

Question 11

Which of the following best describes how the constant gross-margin percentage NRV method allocates joint costs?

Accepted Answer

A) a gross margin is calculated and for each product and then the gross margin is deducted along with separable costs from the final sales value of a product to derive the joint cost allocation for a product 
B) an overall gross margin is calculated and for each product and then the gross margin is deducted along with separable costs from the final sales value of a all the products produced in the joint processing and the allocations are then made based on physical volume measures 
C) an overall gross margin is calculated and for each product the gross margin is deducted along with separable costs from the final sales value of a product to derive the joint cost allocation for the product 
D) a gross margin is calculated and for each product and then gross margin is deducted along from the final sales value of a product to derive the joint cost allocation for a product.

Question 12

How does the net realizable value method allocate joint costs?

Accepted Answer

A) allocates joint costs to joint products on the basis of a comparable physical measure at the split-off point 
B) allocates joint costs to joint products on the basis of the relative sales value at the split-off point 
C) allocates joint costs to joint products in a way that each product has an identical gross-margin percentage 
D) allocates joint costs to joint products on the basis of relative NRV

Question 13

Outputs with a negative sales value because of disposal costs have which of the following impact on costs?

Accepted Answer

A) added to cost of goods sold 
B) added to joint production costs and allocated to joint or main products 
C) added to joint production costs and allocated to byproducts and scrap 
D) subtracted from product revenue

Question 14

The Alfarm Corporation processes raw milk up to the split-off point where two products,cream and liquid skim,are produced and sold.There was no beginning inventory.The following material was collected for the month of February:

The cost of purchasing 820,000 gallons of direct materials and processing it up to the split-off point to yield a total of 797,500 gallons of good product was $2,350,000.What are the physical-volume proportions to allocate joint costs for cream and liquid skim,respectively?

Accepted Answer

A) 54.02% and 45.98% 
B) 55.55% and 44.45% 
C) 50.00% and 50.00% 
D) 53.17% and 46.83%

Question 15

The constant gross-margin percentage method differs from market-based joint-cost allocation method (sales value at split-off and estimated net realizable value)since no account is taken of profits earned before or after the split-off point when allocating joint costs.

Accepted Answer

A) True 
 B)False

Question 16

Joint costs are the costs of a production process that yields multiple products simultaneously.

Accepted Answer

A) True 
 B)False

Question 17

The sales value at split-off method presupposes the exact number of subsequent steps undertaken for further processing.

Accepted Answer

A) True 
 B)False

Question 18

The drawback of the constant gross-margin percentage NRV method in joint costing is that it ________.

Accepted Answer

A) recognizes that profits are derived from the costs incurred after split-off 
B) assumes the profit margin to be identical across all products 
C) attempts to approximate the sales values at split-off by subtracting from final selling prices the separable costs incurred after the split-off point 
D) ignores the separable costs of further processing

Question 19

Which of the methods of allocating joint costs usually is considered the simplest to implement?

Accepted Answer

A) estimated net realizable value 
B) constant gross-margin percentage NRV 
C) sales value at split-off 
D) physical measures

Question 20

If the value of a byproduct drops significantly,it could also be viewed as a joint product.

Accepted Answer

A) True 
 B)False

Exam 16: Cost Allocation: Joint Products and Byproducts

Discuss in brief how easy it is for companies to classify products as main products,joint products,and byproducts.

Joint processing costs are relevant in deciding whether to process the product further.

One of the reasons to allocate joint costs to individual products is to have costs reimbursed under a federal cost=plus contract.

In joint costing,the sales value at split-off method allocates joint costs entirely to joint products sold during the accounting period on the basis of the relative total sales value at the split-off point.

The net realizable value (NRV)method method allocates joint costs to joint products produced during the accounting period in such a way that each individual product achieves an identical gross-margin percentage.

Which of the following best describes how the constant gross-margin percentage NRV method allocates joint costs?

How does the net realizable value method allocate joint costs?

Outputs with a negative sales value because of disposal costs have which of the following impact on costs?

The constant gross-margin percentage method differs from market-based joint-cost allocation method (sales value at split-off and estimated net realizable value)since no account is taken of profits earned before or after the split-off point when allocating joint costs.

Joint costs are the costs of a production process that yields multiple products simultaneously.

The sales value at split-off method presupposes the exact number of subsequent steps undertaken for further processing.

The drawback of the constant gross-margin percentage NRV method in joint costing is that it ________.

Which of the methods of allocating joint costs usually is considered the simplest to implement?

If the value of a byproduct drops significantly,it could also be viewed as a joint product.