- What type of cost is the result of an event that results in more than one product or service simultaneously?
- Byproduct cost
- Joint cost
- Main cost
- Separable cost
Answer: b Difficulty: 2 Objective: 1
- All costs incurred beyond the splitoff point that are assignable to one or more individual products are called
- byproduct costs.
- joint costs.
- main costs.
- separable costs.
Answer: d Difficulty: 2 Objective: 1
- In joint costing
- costs are assigned to individual products as assembly of the product occurs.
- costs are assigned to individual products as disassembly of the product occurs.
- a single production process yields two or more products.
- both (b) and (c).
Answer: d Difficulty: 3 Objective: 1
- When a single manufacturing process yields two products, one of which has a relatively high sales value compared to the other, the two products are respectively known as
- joint products and byproducts.
- joint products and scrap.
- main products and byproducts.
- main products and joint products.
Answer: c Difficulty: 2 Objective: 2
- Byproducts and main products are differentiated by
- number of units per processing period.
- weight or volume of outputs per period.
- the amount of sales value per unit.
- none of the above.
Answer: c Difficulty: 2 Objective: 2
- All of the following changes may indicate a change in product classification of a manufacturing process which has a splitoff point EXCEPT
- a byproduct increases in sales value due to a new application.
- a main product becomes a joint product.
- a main product becomes technologically obsolete.
- a byproduct loses its market due to a new invention.
Answer: b Difficulty: 2 Objective: 2
- Which of the following methods of allocating costs use market-based data?
- Sales value at splitoff method
- Estimated net realizable value method
- The constant gross-margin percentage method
- All of the above use market-based methods
Answer: d Difficulty: 1 Objective: 2
- Products with a relatively low sales value are known as
- scrap.
- main products.
- joint products.
- byproducts.
Answer: d Difficulty: 1 Objective: 2
- Which of the following statements is true regarding main products and byproducts?
- Product classifications do not change over the short run.
- Product classifications do not change over the long run.
- Product classifications may change over time.
- The cause-and-effect criterion determines the classification.
Answer: c Difficulty: 3 Objective: 2
- Outputs with zero sales value are accounted for by
- listing these various outputs in a footnote to the financial statements.
- including the items as a relatively small portion of the value assigned to the products produced during the accounting period.
- making journal entries to reflect an estimate of possible values.
- none of the above.
Answer: d Difficulty: 3 Objective: 2
- Which of the following is a reason to allocate joint costs?
- Rate regulation requirements, if applicable
- Cost of goods sold computations
- Insurance settlement cost information requirements
- All of the above are reasons to allocate joint costs.
Answer: d Difficulty: 1 Objective: 3
- A business which enters into a contract to purchase a product (or products), and will compensate the manufacturer under a cost reimbursement formula, should take an active part in the determination of how joint costs are allocated because
- the manufacturer will attempt to allocate as large a portion of its costs to these products.
- if the manufacturer successfully allocates a large portion of its costs to these products then it will be able to sell its other nonreimbursed products at lower prices.
- the FASB requires the business to participate in the cost allocation process.
- of both (a) and (b).
Answer: d Difficulty: 3 Objective: 3
- Proper costs allocation for inventory costing and cost-of-goods-sold computations are important because
- inventory costing is essential for proper balance sheet presentation.
- most states have laws requiring proper balance sheet presentation, and recommended allocation methods.
- cost of goods sold is an important component in the determination of net income.
- of both (a) and (c).
Answer: d Difficulty: 3 Objective: 3
- Which of the following is NOT a primary reason for allocating joint costs?
- Cost justification and insurance settlement cost information requirements
- Cost justification and asset measurement
- Income measurement and rate regulation requirements
- To calculate the bonus of the chief executive officer
Answer: d Difficulty: 1 Objective: 3
- All of the following methods may be used to allocate joint costs EXCEPT
- the constant gross-margin percentage method.
- the estimated net realizable value method.
- the present value allocation method.
- the sales value at splitoff method.
Answer: c Difficulty: 2 Objective: 4
- An example of a market-based approach to allocating joint costs is (are) allocating joint costs based on
- sales value at splitoff method.
- physical volume.
- constant gross-margin percentage method.
- both (a) and (c).
Answer: d Difficulty: 3 Objective: 4
- Which of the following statements is true in regard to the cause-and-effect relationship between allocated joint costs and individual products?
- A high individual product value results in a high level of joint costs.
- A low individual product value results in a low level of joint costs.
- A high individual product value results in a low level of joint costs.
- There is no cause-and-effect relationship.
Answer: d Difficulty: 3 Objective: 4
- The benefits-received criteria for allocating joint costs indicates market-based measures are preferred because
- physical measures such as volume are a clearer basis for allocating cost than other measures.
- other measures are more difficult to calculate.
- revenues are usually the best indicator of the benefits received.
- of none of the above.
Answer: c Difficulty: 1 Objective: 4
THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 39 THROUGH 42.
Yakima Manufacturing purchases trees from Cascade Lumber and processes them up to the splitoff point where two products (paper and pencil casings) are obtained. 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 November:
Trees processed: 50 trees (yield is 30,000 sheets of paper and 30,000 pencil casings and no scrap)
Production: paper 30,000 sheets
pencil casings 30,000
Sales: paper 29,000 at $0.04 per page
pencil casings 30,000 at $0.10 per casing
Cost of purchasing 50 trees and processing them up to the splitoff point to yield 30,000 sheets of paper and 30,000 pencil casings is $1,500.
Yakima’s accounting department reported no beginning inventories and ending inventory of 1,000 sheets of paper.
- What is the sales value at the splitoff point for paper?
- $120
- $1,160
- $1,200
- $1,950
Answer: c Difficulty: 2 Objective: 4
Paper: 30,000 sheets x $0.04 = $1,200.00
- What is the sales value at the splitoff point of the pencil casings?
- $300
- $1,480
- $3,000
- $3,750
Answer: c Difficulty: 1 Objective: 4
Pencils: 30,000 casings x $0.10 = $3,000.00
- If the sales value at splitoff method is used, what are the approximate joint costs assigned to ending inventory for paper?
- $14.29
- $50.00
- $435.00
- $750.00
Answer: a Difficulty: 3 Objective: 4
$1,200/($1,200 + $3,000) = 28.57%
28.57% x $1,500 x 1,000/30,000 = $14.29
- If the sales value at splitoff method is used, what is the approximate production cost for each pencil casing?
- $0.0250
- $0.0255
- $0.0335
- $0.0357
Answer: d Difficulty: 3 Objective: 4
$3,000/($1,200 + $3,000) x $1,500 = $1,071
$1,071/30,000 casings = $0.0357
- Yakima Manufacturing purchases trees from Cascade Lumber and processes them up to the splitoff point where two products (paper and pencil casings) are obtained. 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 May:
Trees processed: 50 trees (yield is 35,000 sheets of paper and 30,000 pencil casings and no scrap)
Production: paper 35,000 sheets
pencil casings 30,000
Sales: paper 34,000 at $0.04 per page
pencil casings 30,000 at $0.10 per casing
Cost of purchasing 50 trees and processing them up to the splitoff point to yield 35,000 sheets of paper and 30,000 pencil casings is $1,500.
Yakima’s Manufacturing’s accounting department reported no beginning inventories and ending inventory of 1,000 sheets of paper.
What are the paper’s and the pencils’ approximate weighted cost proportions using the sales value at splitoff method, respectively?
- 50.00% and 50.00%
- 33.33% and 66.67%
- 31.82% and 68.18%
- none of the above
Answer: c Difficulty: 2 Objective: 4
$1,400 + 3,000 = $4,400
$1,400/$4,400 = 31.82%
$3,000/$4,400 = 68.18%
- The Arvid Corporation manufactures widgets, gizmos, and turnbols from a joint process. May production is 4,000 widgets; 7,000 gizmos; and 8,000 turnbols. Respective per unit selling prices at splitoff are $15, $10, and $5. Joint costs up to the splitoff point are $75,000. If joint costs are allocated based upon the sales value at splitoff, what amount of joint costs will be allocated to the widgets?
- $30,882
- $26,471
- $17,647
- $28,125
Answer: b Difficulty: 2 Objective: 4
$15 x 4,000 = $60,000
$10 x 7,000 = $70,000
$ 5 x 8,000 = $40,000
Total = $170,000
$60,000/$170,000 x $75,000 = $26,471
- Product X is sold for $8 a unit and Product Y is sold for $12 a unit. Each product can also be sold at the splitoff point. Product X can be sold for $5 and Product Y for $4. Joint costs for the two products totaled $4,000 for January for 600 units of X and 500 units of Y. What are the respective joint costs assigned each unit of products X and Y if the sales value at splitoff method is used?
- $2.96 and $4.44
- $4.00 and $4.55
- $4.00 and $3.20
- $4.55 and $4.55
Answer: c Difficulty: 2 Objective: 4
Total splitoff market value = (600 x $5) + (500 x $4) = $5,000
Product X = $3,000/$5,000 x $4,000 = $2,400/600 = $4.00
Product Y = $2,000/$5,000 x $4,000 = $1,600/500 = $3.20
- A reason why a physical-measure to allocate joint costs is less preferred than the sales value at splitoff is
- a physical measure such as volume is difficult to estimate because of shrinkage.
- physical volume usually has little relationship to the revenue producing power of products.
- a physical measure usually results in the costs being allocated to the product that weighs the most.
- all of the above are reasons why the sales value at splitoff method is preferred to a physical volume measure.
Answer: d Difficulty: 2 Objective: 4
