Chapter 18 Joint Products

Question 1

Common costs

Answer 1

Cost that cannot be identified with a particular joint product - incurred before the split-off point.

These costs do not affect the final quantity of the joint products made ergo allocation is arbitrary and will not inform management decisions BUT is required for financial reporting in adherence to the matching principle

Question 2

Split-off point

Answer 2

Point after which joint products acquire separate identities. Cost incurred prior to this point are common and after this point are separable

Question 3

Separable costs

Answer 3

Cost that can be identified with a particular joint product. Incurred after the split-off point

Question 4

Net realizable value of a joint product

Answer 4

Sales price of the final product (after adding additional processing) less separable cost incurred during additional processing

Question 5

Constant gross margin percentage

Answer 5

Allocates common costs such that the gross margin percentage is identical for each joint product

Gross margin percentage = (sales - cost of goods sold) / sales