Deck 11: Allocation of Joint Costs and Accounting for By-Products

Question 1

If incremental revenues beyond split-off are less than incremental costs, a product should be sold at the split-off point.

Answer 1

True

Question 2

Joint costs occur after the split-off point in a production process.

Answer 2

False

Question 3

The primary distinction between by-products and scrap is the difference in volume produced.

Answer 3

False

Question 4

A decision that must be made at split-off is to sell a product or process it further.

Question 5

If incremental revenues beyond split-off exceed incremental costs, a product should be processed further.

Question 6

Net realizable value equals product sales revenue at split-off minus any costs necessary to prepare and dispose of the product.

Question 7

Monetary allocation measures recognize the revenue generating ability of each product in a joint process.

Question 8

Joint costs may be allocated to by-products as well as primary products.

Question 9

Joint costs occur before the split-off point in a production process.

Question 10

Joint costs include all materials, labor and overhead that are incurred before the split-off point.

Question 11

Joint costs may be allocated to main products, but not to by-products.

Question 12

Two methods of allocating joint costs to products are physical measure allocation and monetary allocation.

Question 13

The primary distinction between by-products and scrap is the difference in sales value.

Question 14

Net realizable value is considered to be the best measure of the expected contribution of each product to the coverage of joint costs.

Question 15

Allocating joint costs based upon a physical measure considers the revenue-generating ability of individual products.

Question 16

Net realizable value equals product sales revenue at split-off plus any costs necessary to prepare and dispose of the product.

Question 17

The net realizable value approach requires that the net realizable value of by-products and scrap be treated as a reduction in joint costs allocated to primary products.

Question 18

Allocating joint costs based upon a physical measure ignores the revenue-generating ability of individual products.

Question 19

The relative sales value method requires a common physical unit for measuring the output of each product.

Question 20

The point at which individual products are first identifiable in a joint process is referred to as the split-off point.

Question 21

Joint costs are allocated to joint products to

A) obtain a cost per unit for financial statement purposes.
B) provide accurate management information on production costs of each type of product.
C) compute variances from expected costs for each joint product.
D) allow the use of high-low analysis by the company.

Question 22

Costs that are incurred in the manufacture of two or more products from a common process are referred to as _________________________.

Question 23

The net realizable value approach is used to account for scrap and by-products when the net realizable value is insignificant.

Question 24

The point at which individual products are first identifiable in a joint process is referred to as the _________________________.

Question 25

Two methods of allocating joint costs to individual products are ________________________________________ and ________________________________________.

Question 26

The net realizable value approach is used to account for scrap and by-products when the net realizable value is significant.

Question 27

Under the realized value approach, no value is recognized for by-products or scrap until they are actually sold.

Question 28

Two incidental products of a joint process are ____________________ and ____________________.

Question 29

If a company obtains two salable products from the refining of one ore, the refining process should be accounted for as a(n)

A) mixed cost process.
B) joint process.
C) extractive process.
D) reduction process.

Question 30

Sales revenue at split-off less disposal costs equals ______________________________.

Question 31

Costs that are incurred after the split-off point in a production process are referred to as ______________________________.

Question 32

Which of the following components of production are allocable as joint costs when a single manufacturing process produces several salable products?

A) direct material, direct labor, and overhead
B) direct material and direct labor only
C) direct labor and overhead only
D) overhead and direct material only

Question 33

Not-for-profit entities are required to allocate joint costs among fund-raising, program, and administrative functions.

Question 34

Joint cost allocation is useful for

A) decision making.
B) product costing.
C) control.
D) evaluating managers' performance.

Question 35

Joint costs are allocated to which of the following products?

A) yes yes
B) yes no
C) no no
D) no yes

Question 36

Three types of products that result from a joint process are _________________________, ____________________, and ____________________.

Question 37

Under the net realizable value approach, no value is recognized for by-products or scrap until they are actually sold.

Question 38

Three monetary measures used to allocate joint costs to products are ________________________________________, ________________________________________, and ____________________________________________________________.

Question 39

Joint costs are useful for

A) setting the selling price of a product.
B) determining whether to continue producing an item.
C) evaluating management by means of a responsibility reporting system.
D) determining inventory cost for accounting purposes.

Question 40

A single process in which one product cannot be manufactured without producing others is referred to as a _________________________.

Question 41

In a lumber mill, which of the following would most likely be considered a primary product?

A) 2 ´ 4 studs
B) sawdust
C) wood chips
D) tree bark

Question 42

A product may be processed beyond the split-off point if management believes that

A) its marketability will be enhanced.
B) the incremental cost of further processing will be less than the incremental revenue of further processing.
C) the joint cost assigned to it is not already greater than its prospective selling price.
D) both a and b.

Question 43

In a joint costing process, which of the following would not be considered a sunk cost?

A) direct material cost
B) direct labor cost
C) joint cost
D) costs incurred to further refine a product created by the process

Question 44

The split-off point is the point at which

A) output is first identifiable as individual products.
B) joint costs are allocated to joint products.
C) some products may first be sold.
D) all of the above.

Question 45

Which of the following statements is true regarding by-products or scrap?

A) Process costing is the only method that should result in by-products or scrap.
B) Job order costing systems will never have by-products or scrap.
C) Job order costing systems may have instances where by-products or scrap result from the production process.
D) Process costing will never have by-products or scrap from the production process.

Question 46

Under an acceptable method of costing by-products, inventory costs of the by-product are based on the portion of the joint production cost allocated to the by-product

A) but any subsequent processing cost is debited to the cost of the main product.
B) but any subsequent processing cost is debited to revenue of the main product.
C) plus any subsequent processing cost.
D) minus any subsequent processing cost.

Question 47

While preparing a salad, the chef removes the core from a head of lettuce. This core would be classified as

A) defective.
B) shrinkage.
C) waste.
D) scrap.

Question 48

Each of the following is a method to allocate joint costs except

A) relative sales value.
B) relative net realizable value.
C) relative weight, volume, or linear measure.
D) average unit cost.

Question 49

Which of the following has sales value?

A) no no
B) yes no
C) yes yes
D) no yes

Question 50

Which of the following is a false statement about scrap and by-products?

A) Both by-products and scrap are salable.
B) A by-product has a higher sales value than does scrap.
C) By-products and scrap are the primary reason that management undertakes the joint process.
D) Both scrap and by-products are incidental outputs to the joint process.

Question 51

Waste created by a production process is

A) accounted for in the same manner as defective units.
B) accounted for as an abnormal loss.
C) material that can be sold as an irregular product.
D) discarded rather than sold.

Question 52

By-products are

A) items resulting from a joint process that have no further value.
B) not sufficient alone, in terms of sales value, for management to justify undertaking the joint process.
C) also known as scrap.
D) the primary reason management undertook the production process.

Question 53

Hairell Company produces three products from a joint process. The products can be sold at split-off or processed further. In deciding whether to sell at split-off or process further, management should

A) allocate the joint cost to the products based on relative sales value prior to making the decision.
B) allocate the joint cost to the products based on a physical quantity measure prior to making the decision.
C) subtract the joint cost from the total sales value of the products before determining relative sales value and making the decision.
D) ignore the joint cost in making the decision.

Question 54

The definition of a sunk cost is

A) a cost that cannot be recovered regardless of what happens.
B) a cost that relates to money poured into the ground.
C) considered the original cost of an item.
D) also known as an opportunity cost.

Question 55

Scrap is defined as a

A) finished unit of product that has no sales value.
B) residual of the production process that has limited sales value.
C) residual of the production process that can be reworked for sale as an irregular unit of product.
D) residual of the production process that has no sales value.

Question 56

Which of the following is/are synonyms for joint products?

A) no no
B) yes yes
C) yes no
D) no yes

Question 57

The net realizable value approach mandates that the NRV of the by-products/scrap be treated as

A) an increase in joint costs.
B) a sunk cost.
C) a reduction of joint costs.
D) a cost that can be ignored totally.

Question 58

Joint costs are most frequently allocated based upon relative

A) profitability.
B) conversion costs.
C) prime costs.
D) sales value.

Question 59

When allocating joint process cost based on tons of output, all products will

A) be salable at split-off.
B) have the same joint cost per ton.
C) have a sales value greater than their costs.
D) have no disposal costs at the split-off point.

Question 60

If two or more products share a common process before they are separated, the joint costs should be assigned in a manner that

A) assigns a proportionate amount of the total cost to each product on a quantitative basis.
B) maximizes total earnings.
C) minimizes variations in unit production costs.
D) does not introduce an element of estimation into the process of accumulating costs for each product.

Question 61

Ellis Company Ellis Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.
Refer to Ellis Company. Using approximated net realizable value at split-off, what amount of joint processing cost is allocated to Product Z (round to the nearest dollar)?

A) $2,796
B) $4,910
C) $4,000
D) $2,390

Question 62

Approximated net realizable value at split-off for joint products is computed as

A) selling price at split-off minus further processing and disposal costs.
B) final selling price minus further processing and disposal costs.
C) selling price at split-off minus allocated joint processing costs.
D) final selling price minus a normal profit margin.

Question 63

Incremental revenues and costs need to be considered when using which allocation method?

A) yes yes
B) yes no
C) no no
D) no yes

Question 64

Ellis Company Ellis Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.
Refer to Ellis Company. Using a physical measure, what amount of joint processing cost is allocated to Product Z (round to the nearest dollar)?

A) $4,000
B) $3,243
C) $5,500
D) $4,757

Question 65

Ellis Company Ellis Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.
Refer to Ellis Company. Using net realizable value at split-off, what amount of joint processing cost is allocated to Product Z (round to the nearest dollar)?

A) $5,500
B) $4,000
C) $2,390
D) $5,610

Question 66

Ellis Company Ellis Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.
Refer to Ellis Company. Which products would be processed further?

A) only Product X
B) only Product Z
C) both Products X and Z
D) neither Product X or Z

Question 67

Incremental separate costs are defined as all costs incurred between ____ and the point of sale.

A) inception
B) split-off point
C) transfer to finished goods inventory
D) point of addition of disposal costs

Question 68

Ellis Company Ellis Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.
Refer to Ellis Company. Using approximated net realizable value at split-off, what amount of joint processing cost is allocated to Product X (round to the nearest dollar)?

A) $3,090
B) $5,204
C) $4,000
D) $2,390

Question 69

For purposes of allocating joint costs to joint products using the relative sales value at split-off method, the costs beyond split-off

A) are allocated in the same manner as the joint costs.
B) are deducted from the relative sales value at split-off.
C) are deducted from the sales value at the point of sale.
D) do not affect the allocation of the joint costs.

Question 70

Ellis Company Ellis Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.
Refer to Ellis Company. Using a physical measure, what amount of joint processing cost is allocated to Product X (round to the nearest dollar)?

A) $4,000
B) $4,757
C) $5,500
D) $3,243

Question 71

Relative sales value at split-off is used to allocate

A) yes yes
B) yes no
C) no yes
D) no no

Question 72

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

A) Separable costs after the split-off point
B) Joint costs to the split-off point
C) Sales salaries for the production period
D) Costs of raw materials purchased for the joint process.

Question 73

The net realizable value approach is normally used when the NRV is expected to be

A) yes yes
B) no yes
C) no no
D) yes no

Question 74

All costs that are incurred between the split-off point and the point of sale are known as

A) sunk costs.
B) incremental separate costs.
C) joint cost.
D) committed costs.

Question 75

Which of the following is a commonly used joint cost allocation method?

A) high-low method
B) regression analysis
C) approximated sales value at split-off method
D) weighted average quantity technique

Question 76

Ellis Company Ellis Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.
Refer to Ellis Company. Using sales value at split-off, what amount of joint processing cost is allocated to Product X (round to the nearest dollar)?

A) $5,500
B) $2,500
C) $4,000
D) $3,243

Question 77

Not-for-profit organizations are required by the ____ to allocate joint costs.

A) AICPA
B) FASB
C) CASB
D) GASB

Question 78

Ellis Company Ellis Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.
Refer to Ellis Company. Using sales value at split-off, what amount of joint processing cost is allocated to Product Z (round to the nearest dollar)?

A) $5,500
B) $4,000
C) $2,500
D) $4,757

Question 79

The method of pricing by-products/scrap where no value is assigned to these items until they are sold is known as the

A) net realizable value at split-off point method.
B) sales value at split-off method.
C) realized value approach.
D) approximated net realizable value at split-off method.

Question 80

Ellis Company Ellis Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.
Refer to Ellis Company. Using net realizable value at split-off, what amount of joint processing cost is allocated to Product X (round to the nearest dollar)?

A) $4,000
B) $5,610
C) $2,390
D) $5,500