Join and By Products

Question 1

what are joint costs

Answer 1

until the point where the different products can be separately identified all conversion work leading up to this point will be common to all products

Question 2

how are joint costs allocated between joint products and by-products

Answer 2

joint costs are shared between the joint products only, the by-products are not allocated any costs

Question 3

are by-products allocated any costs

Answer 3

no

Question 4

what is the sales value of by-products used to do

Answer 4

the sales value (if any) of the by-product is used to reduce the joint costs before they are apportioned to the joint products

Question 5

what does NRV stand for

Answer 5

net realisable value

Question 6

what is net realisable value

Answer 6

selling price less further processing costs, not including joint costs

Question 7

hopefully you will be planning to do the exercise lectures and stuff again to get you to learn the layouts if so then do elq7 to learn format for profit and loss sheet with nrv and joint costing shit

Answer 7

yeah

Question 8

what is the difference between joint costing and job costing

Answer 8

Job costing is used for unique products, and process costing is used for standardised products

Question 9

what are the differences between joint costing and job costing

Answer 9

job costing for unique products process for standardised,
job costing v small production runs process for large,
more record keeping required for job costing process aggregates costs so requires less record keeping,
costing more likely for billings to customers so jobs that would have that

Question 10

also need to remember that you haven’t done a lot of the explain questions for the exercise lectures so when you have all the cards studied would be useful to go back over them

Answer 10

should be done writing cards soon

Question 11

what is JIT

Answer 11

just in time principles

Question 12

what are the just in time (JIT) principles

Answer 12

dedicated to removal of waste and non value adding activities,
careful planning of delivery and production schedules so stock levels of raw material and WIP are minimised

Question 13

what are the benefits of just in time

Answer 13

manufacturer can move from production of one good to another easily because production runs are short,
eliminates warehouse storage needs,
spend less money on raw materials cause just buy enough to make the products and no more

Question 14

what are the disadvantages of just in time

Answer 14

disruptions in the supply chain,
if supplier has breakdown or cannot deliver goods on time then can shut down entire production process,
sudden order that surpasses expectation can delay delivery of finished products to clients

Question 15

what do you do with the cost savings from the by product

Answer 15

take it off the cost of the production for product that is made where the by product comes from

Question 16

how do you allocate the joint costs based on NRV *

Answer 16

find the NRV of each of the products by doing sales minus own costs and then apportion the joint costs based on the fraction of NRV that that product has (example back 10 notes)

Question 17

what are the advantages of doing the NRV joint costing method rather than allocating based on volume

Answer 17

NRV takes into account market prices in addition to quantities,
volume sometimes allocates too much of the cost to high volume products which then appear loss making

Question 18

how do you decide what combination of products to do when given scarce resources

Answer 18

make it into a maximisation problem by formulating the unknowns into inequalities

Question 19

what are dual values/shadow prices *

Answer 19

change in the objective function which occurs for a unit change in the constraint,
effectively opportunity costs (TQ7 understand this)

Question 20

should you draw a graph when doing scarce resources analysis *

Answer 20

yes (TQ7)

Question 21

how do you find the optimal allocation for products doing scarce resource analysis *

Answer 21

draw a graph with all the constraints on it,

use the objective function as a generic line, then float it to an optimum location within the feasible set (TQ7)

Question 22

why is the shadow price useful

Answer 22

useful for incremental decisions when management needs to know the benefit associated with the cost of extending the usage of a resource

Question 23

how do you find the shadow price of something (labour hours for example) that is fully utilised in the optimal solution *

Answer 23

work out what the new optimal solution is if you increase that parameter by 1, then compare the total contribution to before and that is the shadow price of that good (TQ7 part c, back 11)

Question 24

how do you calculate the shadow price of something that is not fully utilised in the optimal solution *

Answer 24

since not fully utilised in the optimal solution, having one extra hour available would not generate any extra contribution so the shadow price is zero (TQ7 part c, 12)

Question 25

what can you do to evaluate which is the optimal point in linear programming given an objective function

Answer 25

plug in the different x and y values into the contribution to see which one gives the highest payoff

Question 26

in what circumstances does slack arise

Answer 26

at the optimal solution, when the resource used is less than the resource available

Question 27

what is the shadow price to do with value

Answer 27

a shadow price is an increase in value which would be created by having one additional unit of a limiting resource available at its original cost

Question 28

is this statement correct - the marginal revenue-earning potential of a limiting factor at the profit maximising output level is its shadow price

Answer 28

no, this should be the marginal contribution-earning potential