quiz 3 Flashcards
The production method of accounting for byproducts recognizes byproducts in the financial statements at the time when production is completed.
True.
The production method of accounting for byproducts does indeed recognize byproducts in financial statements when production is completed. This method accounts for the value of the byproduct at the point of completion and typically deducts its value from the costs of the main product, reducing the cost of goods sold or offsetting expenses.
- Which of the following statements best defines split off point in joint costing?
A. It is the point at which the managers decide to outsource some of its production processes.
B. It is the juncture at which decisions determining joint costs of various products to be produced are taken.
C. It is the point at which managers decide to discontinue one or more of the products.
D. It is the juncture in a joint production process when two or more products become separately identifiable.
D. It is the juncture in a joint production process when 2 or more products become separately identifiable.
The split-off point in joint costing refers to the stage in the production process where joint products can be distinguished as separate and unique items
The net realizable value method (NRV) is generally used for products or services that are processed and after splitoff additional value is added to the product and a selling price can be determined. True or False
True.
The net realizable value (NRV) method is typically used for products or services that undergo additional processing after the split-off point to enhance their value
- An advantage of the physical-measure method is that obtaining physical measures for all products is an easy task. T or F?
False. While the physical-measure method has its merits, like using objective and observable data to allocate joint costs, obtaining physical measures for all products is not always an easy task.
- The constant gross margin (GM) percentage % of NRV method allocates joint costs to joint products in such a way that the gross margin on each joint product is the same as it was in the previous year. T or F?
False.
The constant gross margin percentage of the NRV method allocates joint costs so that each joint product achieves the same (GM) percentage %, but this percentage is calculated for the current period—not carried over from the previous year.
If the value of a byproduct rises significantly, it could also be viewed as a joint product. T or F?
True. If the value of a byproduct increases significantly, it can be reclassified as a joint product. This is because its economic importance and contribution to overall profitability grow, making it comparable to the primary products of the joint production process.
- Chemical Ltd. manufactures two industrial compounds. In the month of May, 15,000 litres of direct material costing $ 160,000 were processed at a cost of $ 400,000. The joint process yielded 16,000 containers of a compound known as Jarlon and 4000 containers of a compound known as Kharton. The respective selling prices of Jarlon and Kharton are $38 and $58. Both products may be processed further. Jarlon may be processed into Jaxton at an incremental cost of $8 per jar of the final product while Kharton may be processed into Kraxton at an additional cost of $32 per jar of the final product. The volume of jars of the final product are 12,000 for Jaxton and 3000 for Kraxton. The selling price of Jaxton is $48 per jar. The selling price of Kraxton is $102 per jar.
Using the physical measures method, the joint costs allocated to Jarlon would be which of the following? Round to the nearest dollar. A.$ 289520 B.$ 405328 C.$ 112000 D.$ 320 000 E.$ 448000
Jarlon: 16,000 containers, Kharton: 4,000 containers. Total output: 16,000 + 4,000 = 20,000 containers
Total Joint Costs=160,000+400,000=560,000. Proportion of Jarlon=16,000 containers (output Jarlon)/ 20,000 containers (Total Output) =0.80.
Jarlon Joint Costs=560,000×0.8=448,000. E. $448,000.*****
- Recognition of byproducts in the financial statements at the time of sale usually occurs when the dollar amounts of the byproducts are immaterial. True or False?
True. Recognition of byproducts at the time of sale is typically done when their dollar amounts are considered immaterial.
Which of the following statements is true of the methods for allocating joint costs? A.The complexity of the sales value at splitoff method increases when managers make frequent changes to the sequence of post-splitoff processing decisions. B.The sales value at splitoff method lacks a common basis for allocating joint costs to products. C.The net realizable value (NRV) method treats the joint products as though they comprise a single product. D.The net realizable value (NRV) method assumes that none of the markup is attributable to the separable costs.
D. The net realizable value (NRV) method assumes that none of the markup is attributable to the separable costs.The NRV method allocates joint costs based on the final sales value of the products after deducting the separable costs incurred after the split-off point
If managers make processing or selling decisions using incremental revenue/incremental cost approach, which of the following statements is TRUE? A. The resulting budgeted product-line income statement under the physical measure method, will show each product to have a positive operating income. B. The resulting budgeted product-line income statement under the sales value at splitoff method, will show each product to have a negative operating income. C. The resulting budgeted product-line income statement under the sales value at splitoff method, will show each product to have a positive operating income. D. The resulting budgeted product-line income statement under the constant gross margin NRV method, will show each product to have a positive (or zero) operating income. E. Estimated net realizable method the resulting budgeted product-line income statement under the estimated NRV method, will show each product to have a zero operating income
D. This is because the constant gross margin NRV method ensures that joint costs are allocated in a way that maintains a consistent gross margin percentage across all joint products. As a result, each product will achieve a positive or zero operating income, assuming no losses.
Which if the following is a negative consequence of recording byproducts in the accounting records when the sale occurs? A. Managers can be tempted to stockpile byproducts. B. Earnings cannot be timed under this method. C. The revenue from the byproducts is usually fairly large and the accounting records will be distorted. D. It involves complex calculations compared to the production method.
A. Recording byproducts in the accounting records at the time of sale can create an incentive for managers to delay sales or stockpile byproducts in order to manipulate reported earnings. This is considered a negative consequence because it may lead to inefficiencies or distortions in operational decision-making.
The constant gross margin percentage NRV method of joint cost allocation _______. A. is the same as the estimated NRV method B. is the same as the sales value at splitoff method. C. will result in different gross margins for each product D. involves allocating costs in such a way that maintaining the same gross margin percentage for each product that was obtained in prior years E. involves allocating costs in such a way that the overall gross margin percentage is identical for the individual products
E. involves allocating costs in such a way that the overall gross margin percentage is identical for the individual products. The constant gross margin percentage NRV method allocates joint costs so that each product achieves the same gross margin percentage. This ensures consistency in profitability across all joint products, based on their net realizable values after further processing.
Which of the following is FALSE concerning the physical measure method? A. It results in a constant gross margin for all products. B. Using a common physical measure can result in the product with the lowest revenue-producing power having the most costs assigned to it. C. Technical personnel outside of accounting may be required in the joint costing determinations. D. The physical measure may not reflect each individual product’s ability to generate revenues. E. Using the benefits-received criterion, the physical measure method less preferred than the sales at splitoff method
A. It results in a constant gross margin for all products. This statement is false regarding the physical measure method. The physical measure method does not ensure a constant gross margin for all products because it allocates joint costs based on physical measures (such as weight, volume, or units) rather than revenue or profitability. The other statements accurately reflect potential challenges or characteristics of the physical measure method.
Which of the following statements is TRUE of the methods for allocating joint costs? A. The net realizable value method results in the same joint production cost per unit for all products. B. The sales value at splitoff method allocates joint costs to each product in proportion to the sales value of total production. C. The net realizable value method uses the sales value of the units sold during the accounting period to allocate joint costs. D. The sales value at splitoff method always results in the same gross-margin percentage for all products
. B. The sales value at splitoff method allocates joint costs to each product in proportion to the sales value of total production.This method uses the relative sales values of the joint products at the split-off point to allocate joint costs, ensuring proportional allocation based on their economic value.
All of the following changes may indicate a change in product classification of a manufacturing process which has a splitoff point EXCEPT _______. A. a main product becomes a joint product B. a byproduct loses its market due to a new invention C. a main product becomes technologically obsolete D. scrap items increase in sales value E. A byproduct increases in market value
A. a main product becomes a joint product, here’s why: A main product becoming a joint product wouldn’t typically indicate a change in product classification. This is because a main product is already a significant output of the process and adjusting it to “joint product” status doesn’t fundamentally alter the nature of classification.
Which statement is NOT true regarding the sales method of accounting for byproducts?
A.
No value is attached to the byproduct inventory.
Your answer is not correct.B.
This method is the preferred method because of the matching principle.
This is the correct answer.C.
The method makes no journal entries until the byproduct is sold.
D.
Revenues of the byproduct can be recorded in the income statement as revenue.
E.
Revenues of the byproduct are not recorded at the time of production.
B.
This method is the preferred method because of the matching principle.
An advantage of the physical-measure method is that obtaining physical measures for all products is an easy task.
True
False
false
If managers make processing or selling decisions using incremental revenue/incremental cost approach, which of the following statements is TRUE?
A.
The resulting budgeted product-line income statement under the sales value at splitoff method, will show each product to have a positive operating income.
B.
The resulting budgeted product-line income statement under the sales value at splitoff method, will show each product to have a negative operating income.
C.
Estimated net realizable method the resulting budgeted product-line income statement under the estimated NRV method, will show each product to have a zero operating income.
D.
The resulting budgeted product-line income statement under the constant gross margin NRV method, will show each product to have a positive (or zero) operating income.
D.
The resulting budgeted product-line income statement under the constant gross margin NRV method, will show each product to have a positive (or zero) operating income.
The net realizable value method can be used for products for which there may not be any market price available at splitoff.
True
Your answer is correct.
False
true
Which of the following is NOT a reason to allocate joint cost?
A.
insurance settlement cost information requirements
B.
rate regulation requirements, if applicable
C.
customer profitability analysis
D.
cost of goods sold computations
Your answer is not correct.E.
cause-and-effect analysis
E.
cause-and-effect analysis
Byproduct revenues appear in the income statement as a cost increase to the main product and as a separate item of expense.
True
False
false
Byproducts and scrap are differentiated by _______.
Question content area bottom
Part 1
A.
the amount of sales value per unit
This is the correct answer.B.
weight or volume of outputs per period
Your answer is not correct.C.
number of units per processing period
D.
management preference only
E.
the amount of costs assigned to each unit
A.the amount of sales value per unit
Separable costs include manufacturing costs only.
True
False
false
The production method of accounting for byproducts recognizes byproducts in the financial statements at the time when production is completed.
True
Your answer is correct.
False
true
The Berkel Corporation manufactures Widgets, Gizmos, and Turnbols from a joint process. June production is 7 comma 000 widgets; 10 comma 000 gizmos; and 11 comma 500 turnbols. Respective per unit selling prices at split-off are $115, $85, and $50. Joint costs up to the splitoff point are $ 188 comma 000. What amount of joint costs will be allocated to the Turnbols? (Do not round any intermediary calculations. Round your final answer to the nearest whole dollar.)
A.$ 15849
B.$ 48475
c. 71,659
d. 67865
Widgets:
7,000×115=805,000
Gizmos:
10,000×85=850,000
Turnbols:
11,500×50=575,000
575,000/2,230,000=0.2579
188,000×0.2579= b) 48,475**
How does the sales value at split-off method allocate joint costs?
Question content area bottom
Part 1
A.
Allocates joint costs to joint products on the basis of relative net realizable value (NRV).
B.
Allocates joint costs to joint products in a way that each product has an identical gross-margin percentage.
C.
Allocates joint costs to joint products on the basis of the relative total sales value at the split-off point.
C.
Allocates joint costs to joint products on the basis of the relative total sales value at the split-off point.
The sales value at splitoff method is the preferred method when selling-price data exist at splitoff because
A.
this is seen as the best measure of benefits received as a result of joint processing..B.
it requires easily obtainable information about any processing occurring after the splitoff point.
.C.
it anticipates subsequent management decisions.
A.
this is seen as the best measure of benefits received as a result of joint processing.
Advantages of the sales value at splitoff method include all of the following EXCEPT _______.
A.
it uses a meaningful denominator
B.
there is no anticipation of subsequent management decisions
C.
the allocation of joint costs could lead managers to make poor decisions
.D.
it does not presuppose an exact number of subsequent steps for further processing
C.
the allocation of joint costs could lead managers to make poor decisions
The decision of whether to process products beyond the splitoff process should be based on which of the following?
A.
gross margin analysis
.B.
production cost analysis
C.
incremental operating income attainable beyond the splitoff point
.D.
revenue analysis
C.
incremental operating income attainable beyond the splitoff point
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 comma 000 for January for 600 units of X and 500 units of Y. What are the respective joint costs assigned to each unit of products X and Y if the sales value at splitoff method is used? Round to the nearest cent.
A.
$4.00 and $3.20
.B.
$4.00 and $4.55
C.
$2.96 and $4.44
C.
$2.96 and $4.44
Product X:
600units×5$/unit=3000
Product Y: 500units×4$/unit=2000
Totalsalesvalue=3000+2000=5000
Px= 4k * 0.6= 2400 Py= 4k* 0.4= 1600
2400/600= 4$
1600/500=3.20$
****
