ACCT 202 Exam 2

Net realizable value (processed beyond the split)

(Final selling price x Quantity) - Additional Processing Costs

3 methods to allocate costs

- Direct Method - Sequential Method - Reciprocal Method

Allocated costs

Janitorial Department costs x usage Percentage

Joint cost allocation

Percent of total net realizable value x Joint cost

Net realizable value (not processed beyond the split)

Selling price at split-off x Quantity

Total Market value at split-off point

Split-off Quantity x Estimated selling Price per pound at Split-off point

Split-off point

That point in production where the joint products become separable.

Joint costs

The costs incurred in a joint manufacturing process

Joint products

The outputs generated from the joint manufacturing process.

Activity based costing

Used to apply overhead to products, support department costs referred to as support activity costs. (similar to multiple production dept.)

Single plantwide rate

Used to apply overhead to products, support departments, costs are simply combined with all other overhead costs

Joint manufacturing process

When a single manufacturing process generates multiple outputs

Support department

A department that provides necessary service to produce a product, but isn't directly involved in the production process.

Weighted average method

Allocates joint costs based on weight factors for each product.

Net realizable value method

Allocates joint costs using each product's estimated net realizable value after it is fully processed.

Market value at split-off method

Allocates joint costs using each product's total market value at the split-off point,

Multiple production dept. rates

Apply to overhead to products, support department costs are first directly traced or distributed to support and production departments.

Reciprocal method

Considers all inter-support-department services, and is the most accurate of all. Most difficult and is most Accurate.

Sequential method

Considers some inter-support-department services. Moderately difficult and is moderately accurate.

Joint costs

Direct Materials + Direct Labor + Overhead

Direct method

allocates all support department costs directly to production departments. Easy to calculate and is least accurate

Physical units method

allocates joint costs using a physical measure of the products at the split-off point, such as pounds, gallons, or inches.