Allocation of Joint Costs and Accounting for By-products BCSV [COST ACCOUNTING] Allocation of Joint Costs and Accounting for By-products
I T!"ori"s #ultipl" C!oic" Select the letter of the best answer.
1.
The The poin pointt in a join jointt prod produc ucti tion on pro proce cess ss whe where re ea each ch ind indiv ivid idua uall prod produc uctt becoes separately identi!able is coonly called the" A. deci decisi sion on poi point nt.. B. sepa separa rati tion on poin point. t. C. indivi individua duall produ product ct poi point. nt. #. spli split-o t-o$ $ poi point nt.. %. join jointt pro produ duct ct poin point. t.
&.
The The join jointt-co cost st all alloc ocat atio ion n etho ethod d that that rec recog ogni ni'e 'es s the rev reven enues ues at at spli split-o t-o$ $ but but does not consider any further processing costs is the" A. relat relative ive-sa -sales les-v -valu alue e ethod. ethod. B. net-re net-reali ali'ab 'ablele-val value ue ethod. ethod. C. physic physicalal-unit units s ethod ethod.. #. recipro reciprocal-a cal-account ccounting ing ethod. ethod. %. gross gross ar argin gin at split split-o$ -o$ eth ethod. od.
(.
)hic )hich h of the the fol follo lowi wing ng et etho hods ds sho should uld be sel selec ecte ted d if a co copa pany ny ter teri ina nate tes s all processing at the split-o$ point and desires to use a cost-allocation approach that considers the *revenue-produci * revenue-producing ng ability* of each product+ A. ,r ,ross oss arg argin in at spl split-o it-o$ $ ethod ethod.. B. ecipro eciprocal cal-ac -acco counti unting ng ethod ethod.. C. elativ elative-s e-sale aless-val value ue ethod. ethod. #. hysic hysicalal-uni units ts ethod ethod.. %. /et-re /et-reali ali'ab 'ablele-val value ue ethod ethod..
0.
)hic )hich h of the the foll follow owin ing g choi choice ces s corr correc ectl tly y deno denote tes s the the data data nee neede ded d to all alloc ocat ate e joint costs under the relative-sales-value relative-sales-value ethod+ Sales Sales alue of alue Separab roduct After of roduct le rocessing at SplitCost Beyond Split-2$ 2$ A. 3es 3es /o B. 3es 3es 3es C. 3es /o /o #. /o 3es 3es %. /o /o 3es
4.
)hen )hen allo alloca cati ting ng joi joint nt cos costs ts55 )ol )olst stei ein n calcu calcula late tes s the !na !nall sale sales s valu value e of the the various products anufactured and subtracts appropriate separable costs. Page 1 of 17
Allocation of Joint Costs and Accounting for By-products BCSV
The copany is using the" A. gross argin at split-o$ ethod. B. reciprocal-accounting ethod. C. relative-sales-value ethod. #. physical-units ethod. %. net-reali'able-value ethod. 6.
)hich of the following stateents about joint-cost allocation is false+ A. Joint-cost allocation is useful in deciding whether to further process a product after split-o$. B. Joint-cost allocation is useful in a7ing a pro!t deterination about individual joint products. C. Joint-cost allocation is helpful in inventory valuation. #. Joint-cost allocation can be based on the nuber of units produced. %. Joint-cost allocation can be accoplished by using several di$erent ethods that focus on sales value and product *worth.*
8. Consider the following stateents about joint product cost allocation" 9. 99. 999.
Joint product cost is allocated because it is necessary for inventory valuation. Joint product cost is allocated because it is necessary for a7ing econoic decisions about individual products :e.g.5 sell at split-o$ or process further;. Joint cost ay be allocated to products by using several di$erent ethods.
)hich of the above stateents is :are; correct+ A. 9 only. B. 999 only. C. 9 and 99. #. 9 and 999. %. 95 995 and 999. <. %astside =ospital has two service departents :atient ecords and Accounting; and two *production* departents :9nternal >edicine and Surgery;. )hich of the following allocations would li7ely ta7e place under the reciprocalservices ethod of cost allocation+ A. Allocation of Accounting cost to atient ecords. B. Allocation of atient ecords cost to 9nternal >edicine. C. Allocation of Surgery cost to Accounting. #. Allocation of 9nternal >edicine cost to Surgery. %. Allocations *A* and *B* above. ?. )estside =ospital has two service departents :atient ecords and Accounting; and two *production* departents :9nternal >edicine and Surgery;. )hich of the following allocations would not ta7e place under the reciprocal-services ethod of cost allocation+ A. Allocation of Accounting cost to atient ecords. B. Allocation of atient ecords cost to 9nternal >edicine. Page 2 of 17
Allocation of Joint Costs and Accounting for By-products BCSV
C. Allocation of Surgery cost to Accounting. #. Allocation of 9nternal >edicine cost to Surgery. %. Allocations *C* and *#* above. 1@. 9f a copany obtains two salable products fro the re!ning of one ore5 the re!ning process should be accounted for as a:n; a. ied cost process. b. joint process. c. etractive process. d. reduction process. 11. Joint costs are allocated to joint products to a. obtain a cost per unit for !nancial stateent purposes. b. provide accurate anageent inforation on production costs of each type of product. c. copute variances fro epected costs for each joint product. d. allow the use of high-low analysis by the copany. 1&. Joint costs are allocated to which of the following products+ By-products a. b. c. d.
yes yes no no
Scrap yes no no yes
1(. Joint cost allocation is useful for a. decision a7ing. b. product costing. c. control. d. evaluating anagers perforance. 10. Joint costs are useful for a. setting the selling price of a product. b. deterining whether to continue producing an ite. c. evaluating anageent by eans of a responsibility reporting syste. d. deterining inventory cost for accounting purposes. 14. )hich of the following coponents of production are allocable as joint costs when a single anufacturing process produces several salable products+ a. direct aterial5 direct labor5 and overhead b. direct aterial and direct labor only c. direct labor and overhead only d. overhead and direct aterial only 16. %ach of the following is a ethod to allocate joint costs "$c"pt a. relative sales value. b. relative net reali'able value. c. relative weight5 volue5 or linear easure. Page 3 of 17
Allocation of Joint Costs and Accounting for By-products BCSV
d. average unit cost. 18. Joint costs are ost freuently allocated based upon relative a. pro!tability. b. conversion costs. c. prie costs. d. sales value. 1<. a. b. c. d.
)hen allocating joint process cost based on tons of output5 all products will be salable at split-o$. have the sae joint cost per ton. have a sales value greater than their costs. have no disposal costs at the split-o$ point.
1?. 9f two or ore products share a coon process before they are separated5 the joint costs should be assigned in a anner that a. assigns a proportionate aount of the total cost to each product on a uantitative basis. b. aii'es total earnings. c. inii'es variations in unit production costs. d. does not introduce an eleent of estiation into the process of accuulating costs for each product. &@. Scrap is de!ned as a a. !nished unit of product that has no sales value. b. residual of the production process that has liited sales value. c. residual of the production process that can be rewor7ed for sale as an irregular unit of product. d. residual of the production process that has no sales value. &1. )aste created by a production process is a. accounted for in the sae anner as defective units. b. accounted for as an abnoral loss. c. aterial that can be sold as an irregular product. d. discarded rather than sold. &&. )hile preparing a salad5 you reove the core of a head of lettuce. This core would be classi!ed as a. defective. b. shrin7age. c. waste. d. scrap. &(. )hich of the following isDare synonys for joint products+ >ain products a. no b. yes
Co-products no yes
Page 4 of 17
Allocation of Joint Costs and Accounting for By-products BCSV
c. yes d. no
no yes
&0. 9n a luber ill5 which of the following would ost li7ely be considered a priary product+ a. & 0 studs b. sawdust c. wood chips d. tree bar7 &4. Eisher Copany produces three products fro a joint process. The products can be sold at split-o$ or processed further. 9n deciding whether to sell at split-o$ or process further5 anageent should a. allocate the joint cost to the products based on relative sales value prior to a7ing the decision. b. allocate the joint cost to the products based on a physical uantity easure prior to a7ing the decision. c. subtract the joint cost fro the total sales value of the products before deterining relative sales value and a7ing the decision. d. ignore the joint cost in a7ing the decision. &6. By-products are a. allocated a portion of joint production cost. b. not suFcient alone5 in ters of sales value5 for anageent to justify underta7ing the joint process. c. also 7nown as scrap. d. the priary reason anageent undertoo7 the production process. &8. )hich of the following stateents is tru" regarding by-products or scrap+ a. rocess costing is the only ethod that should result in by-products or scrap. b. Job order costing systes will never have by-products or scrap. c. Job order costing systes ay have instances where by-products or scrap result fro the production process. d. rocess costing will never have by-products or scrap fro the production process. &<. )hich of the following has sales value+ By-products a. b. c. d.
no yes yes no
)aste no no yes yes
&?. Gnder an acceptable ethod of costing by-products5 inventory costs of the byproduct are based on the portion of the joint production cost allocated to the by-product a. but any subseuent processing cost is debited to the cost of the ain Page 5 of 17
Allocation of Joint Costs and Accounting for By-products BCSV
product. b. but any subseuent processing cost is debited to revenue of the ain product. c. plus any subseuent processing cost. d. inus any subseuent processing cost. (@.
)hich of the following is a fals" stateent 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 priary reason that anageent underta7es the joint process. d. Both scrap and by-products are incidental outputs to the joint process.
(1. The split-o$ point is the point at which a. output is !rst identi!able as individual products. b. joint costs are allocated to joint products. c. soe products ay !rst be sold. d. all of the above. (&. A product ay be processed beyond the split-o$ point if anageent believes that a. its ar7etability will be enhanced. b. the increental cost of further processing will be less than the increental 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. ((. )hich of the following would not be considered a sun7 cost+ a. direct aterial cost b. direct labor cost c. joint cost d. building cost (0. The de!nition of a sun7 cost is a. a cost that cannot be recovered regardless of what happens. b. a cost that relates to oney poured into the ground. c. considered the original cost of an ite. d. also 7nown as an opportunity cost. (4. The net reali'able value approach andates that the / of the by-productsDscrap be treated as a. an increase in joint costs. b. a sun7 cost. c. a reduction of joint costs. d. a cost that can be ignored totally. (6. The net reali'able value approach is norally used when the / is epected to be insigni!cant
signi!cant Page 6 of 17
Allocation of Joint Costs and Accounting for By-products BCSV
a. b. c. d.
yes no no yes
yes yes no no
(8. Approiated net reali'able value at split-o$ for joint products is coputed as a. selling price at split-o$ inus further processing and disposal costs. b. !nal selling price inus further processing and disposal costs. c. selling price at split-o$ inus allocated joint processing costs. d. !nal selling price inus a noral pro!t argin. (<. )hich of the following is a coonly used joint cost allocation ethod+ a. high-low ethod b. regression analysis c. approiated sales value at split-o$ ethod d. weighted average uantity techniue (?. 9ncreental separate costs are de!ned as all costs incurred between HHHHHHHHHHH and the point of sale. a. inception b. split-o$ point c. transfer to !nished goods inventory d. point of addition of disposal costs 0@. All costs that are incurred between the split-o$ point and the point of sale are 7nown as a. sun7 costs. b. increental separate costs. c. joint cost. d. coitted costs. 01. 9ncreental revenues and costs need to be considered when using which allocation ethod+ hysical easures a. b. c. d.
yes yes no no
Sales value at splito$ yes no no yes
0&. The ethod of pricing by-productsDscrap where no value is assigned to these ites until they are sold is 7nown as the a. net reali'able value at split-o$ point ethod. b. sales value at split-o$ ethod. c. reali'ed value approach. d. approiated net reali'able value at split-o$ ethod. 0(. elative sales value at split-o$ is used to allocate Page 7 of 17
Allocation of Joint Costs and Accounting for By-products BCSV
costs beyond split-o$ a. b. c. d.
yes yes no no
joint costs yes no yes no
00. Eor purposes of allocating joint costs to joint products using the relative sales value at split-o$ ethod5 the costs beyond split-o$ a. are allocated in the sae anner as the joint costs. b. are deducted fro the relative sales value at split-o$. c. are deducted fro the sales value at the point of sale. d. do not a$ect the allocation of the joint costs. 04. /ot-for-pro!t organi'ations are reuired by the HHHHHHH to allocate joint costs. a. A9CA b. EASB c. CASB d. ,ASB Tru" or %als"
)rite T if the stateent is true otherwise5 )rite E. 1. &. (. 0.
Joint costs occur after the split-o$ point in a production process Joint costs occur before the split-o$ point in a production process Joint costs are allocated to by-products as well as priary products. The priary distinction between by-products and scrap is the di$erence in sales value. 4. The priary distinction between by-products and scrap is the di$erence in volue produced. 6. The point at which individual products are !rst identi!able in a joint process is referred to as the split-o$ point 8. Joint costs include all aterials5 labor and overhead that are incurred before the split-o$ point. <. Two ethods of allocating joint costs to products are physical easure allocation and onetary allocation. ?. A decision that ust be ade at split-o$ is to sell a product or process it further. 1@. Allocating joint costs based upon a physical easure ignores the revenuegenerating ability of individual products. 11. Allocating joint costs based upon a physical easure considers the revenuegenerating ability of individual products. 1&. >onetary allocation easures recogni'e the revenue generating ability of each product in a joint process. 1(. The relative sales value ethod reuires a coon physical unit for easuring the output of each product. 10. Joint costs are allocated to ain products5 but not to by-products 14. /et reali'able value euals product sales revenue at split-o$ plus any costs necessary to prepare and dispose of the product. Page 8 of 17
Allocation of Joint Costs and Accounting for By-products BCSV
16. /et reali'able value euals product sales revenue at split-o$ inus any costs necessary to prepare and dispose of the product. 18. 9f increental revenues beyond split-o$ are less than increental costs5 a product should be sold at the split-o$ point. 1<. 9f increental revenues beyond split-o$ eceed increental costs5 a product should be processed further. 1?. The net reali'able value approach reuires that the net reali'able value of byproducts and scrap be treated as a reduction in joint costs allocated to priary products. &@. /et reali'able value is considered to be the best easure of the epected contribution of each product to the coverage of joint costs. &1. The net reali'able value approach is used to account for scrap and by-products when the net reali'able value is insigni!cant. &&. The net reali'able value approach is used to account for scrap and by-products when the net reali'able value is signi!cant. &(. Gnder the reali'ed value approach5 no value is recogni'ed for by-products or scrap until they are actually sold. &0. Gnder the net reali'able value approach5 no value is recogni'ed for by-products or scrap until they are actually sold. &4. /ot-for-pro!t entities are reuired to allocate joint costs aong fund-raising5 progra5 and adinistrative functions.
II
&ro'l"(s
&ro'l"( I >ercury Corporation allocates joint costs by using the net-reali'able-value ethod. 9n the copanys >ichigan plant5 products # and % eerge fro a joint process that costs &4@5@@@. % is then processed at a cost of &&@5@@@ into products E and ,. #ata pertaining to #5 E5 and , follow.
Costs beyond split-o$ Selling price ounds produced
# 4@5@@ @ 0@ 1@5@@@
E &85@@ @ (< 05@@@
, &45@@ @ 4@ &5@@@
euired" 1. Allocate the P 220,000 processing cost between products F and G. 2. From a proftability perspective, should product be processed into products F and G!
&ro'l"( II Barry Copany anufactures I-1115 I-11&5 and I-11( fro a joint process. The following inforation is available for the period just ended"
Gnits produced Joint cost allocation
I-111 65@@ @ 1
I-11& 105@@@ 1<50@@
I-11( (@5@@@ (
Total 4@5@@@ <@5@@@ Page 9 of 17
Allocation of Joint Costs and Accounting for By-products BCSV
Sales value at splito$
1@05@@ @
&
0
&6@5@@@
euired" ". Assume that #arry does not use the physical$units method but instead allocates %oint costs by using the relative$sales$value method. Find the &our un'nowns in the preceding table. &ro'l"( III Suppose that one hog yields (@@ pounds of ha5 &@@ pounds of chops5 and 1@@ pounds of iscellaneous ites. The sales value of ha is 1.&@ per poundK chops5 1.4@ per poundK and iscellaneous ites5 @.?@ per pound. The hog costs 4<@5 and processing costs are &@.
euired" (. )etermine the proper allocation o& %oint costs to the three products by using the physical$units method. *. +epeat the process by using the relative$sales$value method. &ro'l"( IV =iggins Corporation anufactures two cheicals :Eletra and =ydro; in a joint process. #ata fro a recent onth follow.
#irect aterials used" (6@5@@@ #irect labor" 14@5@@@ >anufacturing overhead" 6?@5@@@ >anufacturing output" Eletra" 0@5@@@ gallons =ydro" 1&@5@@@ gallons Eletra sells for 14 per gallon and =ydro sells for &@ per gallon. euired" . -ompute the total %oint costs to be allocated to Fletra and /ydro. . -ompute the %oint costs that would be allocated to Fletra by using the physical$units method. . -ompute the %oint costs that would be allocated to /ydro by using the relative$sales$value method. . Assume that /ydro can be converted into a more refned product, /ydro$ +, in a totally separable process at an additional cost o& 3( per gallon. /ydro$+ can be sold in the mar'etplace &or 32 per gallon. a. -ompute the net reali4able value o& /ydro$+. b. 5& /iggins allocated 300,000 o& %oint cost to /ydro$+ and sold 06 o& the production completed, determine the cost o& remaining /ydro$+ that would be trans&erred to the company7s month$end balance sheet as fnished$goods inventory. &ro'l"( V 2hio Cheical anufactures two industrial cheicals in a joint process. 9n 2ctober5 direct aterial costing 1&@5@@@ was processed at a cost of
Page 10 of 17
Allocation of Joint Costs and Accounting for By-products BCSV
(@@5@@@5 resulting in 165@@@ pounds of ente and 05@@@ pounds of ,laco. ente sells for (4 per pound and ,laco sells for 6@ per pound. >anageent generally processes each of these cheicals further in separable processes to produce ore re!ned products. ente is processed separately at a cost of 8.4@ per pound5 with the resulting product5 ente-5 selling for 04 per pound. ,laco is processed separately at a cost of 1@ per pound5 and the resulting product5 ,laco-5 sells for 1@@ per pound. euired" 10.-ompute the company8s total %oint production costs. 11.Assuming that total %oint production costs amounted to 3*00,000, allocate these costs by using9 A. :he physical$units method. #. :he relative$sales$value method. -. :he net$reali4able$value method. &ro'l"( VI #ouglas Copany5 a new !r5 anufactures two products5 J and L5 in a coon process. The joint costs aount to <@5@@@ per batch of !nished goods. %ach batch results in &@5@@@ liters of output5 of which <@M are J and &@M are L.
The two products are processed beyond the split-o$ point5 with #ouglas incurring the following separable costs" J5 & per literK L5 4 per liter. After the additional processing5 the selling price of J is 1& per liter5 and the selling price of L is 14 per liter. euired" 12.)etermine the proper allocation o& %oint costs i& the company uses the net$ reali4able$value method. 1".Assume that )ouglas sold all o& its production o& ; during the current accounting period. -ompute ;8s sales revenue, cost o& goods sold, and gross margin. &ro'l"( VII
atcli$ Copany produces two products fro a joint process" I and N. Joint processing costs for this production cycle are <5@@@.
I N
3ards
Sales price per yard at split-o$
#isposal cost per yard at split-o$
Eurther processing per yard
Einal sale price per yard
154@@ &5&@@
6.@@ ?.@@
(.4@ 4.@@
1.@@ (.@@
8.4@ 11.&4
9f I and N are processed further5 no disposal costs will be incurred or such costs will be borne by the buyer. 1(.
Page 11 of 17
Allocation of Joint Costs and Accounting for By-products BCSV allocated to = >round to the nearest dollar?! 1*.
round to the nearest dollar?! 1.round to the nearest dollar?! 1.round to the nearest dollar?! 1.round to the nearest dollar?! 1.round to the nearest dollar?! 20.round to the nearest dollar?! 21.round to the nearest dollar?! 22.Bhich product>s? would be processed &urther!
&ro'l"( )III ,ordon Copany produces three products" A5 B5 and C fro the sae process. Joint costs for this production run are &51@@.
A B C
ounds
Sales price per lb. at split-o$
#isposal cost per lb. at split-o$
Eurther processing per pound
Einal sales price per pound
<@@ 151@@ 154@@
6.4@ <.&4 <.@@
(.@@ 0.&@ 0.@@
&.@@ (.@@ (.4@
8.4@ 1@.@@ [email protected]@
9f the products are processed further5 ,ordon Copany will incur the following disposal costs upon sale" A5 (.@@K B5 &.@@K and C5 1.@@. 2".round to the nearest dollar?! 2(.round to the nearest dollar?! 2*.round to the nearest dollar?! 2.round to the nearest dollar?! 2.round to the nearest dollar?! 2.round to the nearest dollar?!
&ro'l"( I) Sabrina Copany is placing an ad in the local paper to advertise its products. The ad will run for one wee7 at a total cost of 454@@. Sabrina Copany has four categories of products as follows"
Page 12 of 17
Allocation of Joint Costs and Accounting for By-products BCSV
M of Ooor space occupied
%pected sales value
&@M 14 04 &@
(45@@@ 145@@@ 6054@@ &454@@
=ardware =and Tools Pawn Eurniture Pight Eitures
2.Bhat amount o& advertising cost should be allocated to hardware, assuming Cabrina allocates based on percent o& Door space occupied! "0.Assume that Cabrina decides to allocate based on epected sales value. Bhat amount o& advertising cost should be allocated to light ftures >round to the nearest dollar?!
&ro'l"( )I )halen Copany anufactures products I and 3 fro a joint process that also yields a by-product5 N. evenue fro sales of N is treated as a reduction of joint costs. Additional inforation is as follows"
roducts 3
I Gnits produced Joint costs Sales value at split-o$
N
Total
&@5@@@ +
&@5@@@ +
1@5@@@ +
4@5@@@ &6&5@@@
(@@5@@@
14@5@@@
1@5@@@
06@5@@@
Joint costs were allocated using the sales value at split-o$ approach "1.:he %oint costs allocated to product = were! "2.:he %oint costs allocated to product E were!
&ro'l"( )II Tropical Copany anufactures three products in a joint process which costs &45@@@. %ach product can be sold at split-o$ or processed further and then sold. 1@5@@@ units of each product are anufactured. The following inforation is available for the three products"
roduct
Sales alue at Split-o$
A B C
1& 1@ 14
Separable rocessing Costs after Split-o$
Sales alue at Copletion ? 0 6
&1 18 1?
"".. 5& Product A is processed beyond the split$o point, proft will! >answer by increase or decrease by >amount? or no change? "(.:o maimi4e profts, which products should :ropical process &urther!
&ro'l"( )III
Page 13 of 17
Allocation of Joint Costs and Accounting for By-products BCSV
)allace Copany produces only two products and incurs joint processing costs that total (584@. roducts Alpha and Beta are produced in the following uantities during each onth" 054@@ and 65@@@ gallons5 respectively. )allace Copany also runs one ad each onth that advertises both products at a cost of 154@@. The selling price per gallon for the two products are &@ and 18.4@5 respectively. "*. Bhat amount o& %oint processing costs is allocated to each product based on gallons produced! ". Bhat amount o& advertising cost is allocated to each product based on sales value!
&ro'l"( )IV ,able Copany produces two ain products jointly5 A and B5 and C5 which is a byproduct of B. A and B are produced for the sae raw aterial. C is anufactured fro the residue of the process creating B. Costs before separation are apportioned between the two ain products by the net reali'able value ethod. The net revenue reali'ed fro the sale of C is deducted fro the cost of B. #ata for April were as follows"
Costs before separation Costs after separation" A B C
&@@5@@@ 4@5@@@ (&5@@@ 05@@@
roduction for April5 in pounds" A B C Sales for April" A B C
<@@5@@@ &@@5@@@ &@5@@@
60@5@@@ pounds Q .0(84 1<@5@@@ pounds Q .64 &@5@@@ pounds Q .(@
". )etermine the gross proft &or April.
&ro'l"( )V Peigh >anufacturers produces three products fro a coon anufacturing process. The total joint cost of producing &5@@@ pounds of roduct AK 15@@@ pounds of roduct BK and 15@@@ pounds of roduct C is 854@@. Selling price per pound of the three products are 14 for roduct AK 1@ for roduct BK and 4 for roduct C. Joint cost is allocated using the sales value ethod. *"+uir"d, ". -ompute the unit cost o& Product A i& all three products are main products. ". -ompute the unit cost o& Product A i& Products A and # are main products and Product - is a by$product &or which the cost reduction
Page 14 of 17
Allocation of Joint Costs and Accounting for By-products BCSV method is used.
&ro'l"( )VI >cRueen Copany processes raw aterial in #epartent 1 fro which coe two ain products5 A and B5 and a by-product5 C. A is further processed in #epartent &5 B in #epartent (5 and C in #epartent 0. The value of the by-product reduces the cost of the ain products5 and sales value is used to allocate joint costs.
Cost 9ncurred" roduction" A B C Selling rice" A B C
#ept 1
#ept &
#ept (
#ept 0
?@5@@@
1@5@@@
<5@@@
1@5@@@
1@5@@@ lbs. &@5@@@ lbs. 1@5@@@ lbs.
1@Dlb. 4Dlb. &Dlb.
*"+uir"d, (0. -ompute unit costs &or A and #. (1. nding inventory consists o& *,000 lbs. o& # and 1,000 lbs. o& -. Bhat is the value o& the inventory! (2. +ecompute a and b allocating cost based on net reali4able value.
Suggested Ley 9. Theories >ultiple choice 1. # &. A (. C 0. C 4. % 6. A 8. # <. % ?. % [email protected] 11.A
16. 18. 1<. 1?. &@. &1. &&. &(. &0. &4. &6.
# # B A B # C B A # B
(1. (&. ((. (0. (4. (6. (8. (<. (?. 0@. 01.
# # # A C B B C B B C Page 15 of 17
Allocation of Joint Costs and Accounting for By-products BCSV
1&.C 1(.B 10.# 14.A
&8. &<. &?. (@.
C B C C
0&. 0(. 00. 04.
C C # A
True or Ealse 1. E &. T (. E 0. T 4. E 6. T 8. T <. T ?. T
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Page 16 of 17
Allocation of Joint Costs and Accounting for By-products BCSV
Page 17 of 17