ACCT 3303 - Ch. 16

How much is the ending inventory for the byproduct if byproducts are recognized in the general ledger at the point of sale?

$0

Torid Company processes 17,500 gallons of direct materials to: Under production method, Product X NRV would be offset against

$26,875

If the byproduct inventory is recorded at NRV less profit margin of 20%, the balance sheet will report ________ of byproduct inventory.

$300

The production method will report Product X in the balance sheet

$375

Which of the following statements is true of joint costing? A) The costs of a production process that yields multiple products simultaneously are called joint costs. B) Distribution costs incurred beyond the splitoff point that are assignable to each of the specific products identified at the splitoff point are considered as joint costs. C) The primary purpose of joint costing is to allocate the separable costs to the individual products that are eventually sold. D) Joint costing is less useful for companies which manufacture multiple products simultaneously from the same production process.

A

Which of the following statements is true of the production method of accounting for byproducts?

A) It makes no journal entries until the byproduct is sold. B) It is the preferred method because of the matching principle.

What type of cost is the result of an event that results in more than one product or service simultaneously? A) byproduct cost B) joint cost C) main cost D) separable cost

B

Which of the following statements is true of joint production process and its components? A) Distribution costs incurred beyond the splitoff point assignable to each of the specific products identified at the splitoff point are considered as joint costs. B) Decisions relating to the sale or further processing of each identifiable product can be made independently of decisions about the other products beyond the splitoff point. C) When a joint production process yields two or more products with low total sales values relative to the total sales values of other products, those products are called joint products. D) The primary purpose of joint costing is to allocate the separable costs to the individual products that are eventually sold.

B

Which of the following journal entries can happen only under the production method of recording byproducts?

Byproduct Inventory Finished Goods - Main product Work in Process

In joint costing, which of the following changes may lead to a change in product classification? A) main product sales price increases due to a new application B) byproduct sales price decreases due to a new government regulation C) main product becomes technologically obsolete D) byproduct loses its market due to a new invention

C

The focus of joint costing is on allocating costs to individual products ________. A) before the splitoff point B) after the splitoff point C) at the splitoff point D) at the end of production

C

The products of a joint production process that have low total sales values compared with the total sales value of the main product are called ________. A) primary products B) joint products C) byproducts D) waste products

C

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 ________. A) joint products and byproducts B) joint products and scrap C) main products and byproducts D) main products and joint products

C

Which of the following statements best define splitoff point in joint costing? A) It is the point at which managers decide to discontinue one or more of the products. B) It is the point at which the managers decide to outsource some of its production processes. C) It is the juncture in a joint production process when two or more products become separately identifiable. D) It is the juncture at which decisions determining joint costs of various products to be produced are taken.

C

Which of the following statements is true of main products and byproducts? A) A byproduct will never become a main product. B) A main product will never become a byproduct. C) Product classifications may change over time. D) Product classifications remains constant over time.

C

________ is the differentiating factor while classifying a product as a main product or byproduct. A) Number of units per processing period B) Weight or volume of outputs per period C) Percentage of total sales value D) Joint costs incurred up to the splitoff point

C

Which of the following statements is true of sell-or-process-further decisions in joint costing?

Costs that differ between the alternatives of selling products or processing further are relevant.

Products with a relatively low sales value are known as ________. A) primary products B) main products C) joint products D) byproducts

D

In joint costing, the potential confict between cost concepts used for decision making and cost concepts used for evaluating the performance of managers will be most severe when the ________ method is used.

physical measure

Which method of accounting recognizes byproducts in the financial statements at the time their production is completed?

production method

What factor most often drives joint cost allocation?

selling prices

In joint costing, the sales value at splitoff method is used frequently________.

since the selling-price data exists at the splitoff

In joint costing, which of the following is a market-based approach to allocating costs? A) sales units B) units of production C) physical measures D) net realizable value

d

The net realizable value method ________. A) allocates joint costs to joint products on the basis of a comparable physical measure at the splitoff point B) allocates joint costs to joint products on the basis of the relative sales value at the splitoff point C) allocates joint costs to joint products in a way that each product has an identical gross-margin percentage D) allocates joint costs to joint products on the basis of relative NRV

d

A negative consequence of recording byproducts in the accounting records when the sale occurs is that ________.

managers can be tempted to stockpile byproducts

Which of the following statements best define joint products? A) When one product has a high total sales value compared with the total sales value of other products of the process, that product is called a joint product. B) Product of a joint production process that have the same sales value compared with the total sales value of the byproducts is called a joint product. C) When one product has a low total sales value compared with the total sales value of other products of the process, that product is called a joint product. D) When a joint production process yields two or more products with high total sales values relative to the total sales values of other products, those products are called joint products.

D

Which of the following statements is true of the sales method of accounting for byproducts?

It allows a firm to manage its reported earnings by timing the sale of byproducts.

In joint costing, the ________ assumes that all the markup is attributable to the joint process costs.

NRV method

When the selling prices of all products at the splitoff point are unavailable, the ________ is the best alternative for allocating joint costs.

NRV method

Which of the following statements is true of the methods for allocating joint costs?

The NRV method assumes that none of the markup is attributable to the separable costs.

A business which enters into a contract to purchase a product which compensates the manufacturer under a cost reimbursement agreement should take an active part in the determination of how joint costs are allocated because ________. A) the manufacturer may allocate a large portion of its other costs to these products B) the business need those information for its tax reporting purposes C) the FASB requires the business to participate in the cost allocation process D) it is an opportunity for the business to enhance its market knowledge

a

The sales value at splitoff method ________. A) allocates joint costs to joint products on the basis of the relative total sales value at the splitoff point B) allocates joint costs to joint products on the basis of a comparable physical measure at the splitoff point C) allocates joint costs to joint products on the basis of relative NRV D) allocates joint costs to joint products in a way that each product has an identical gross-margin percentage

a

Which of the following is a possible reason to allocate joint costs to individual products? A) rate regulation requirements B) to prepare financial statements C) for product design decisions D) to determine tax rates

a

A reason why a physical-measure to allocate joint costs is less preferred than the sales value at splitoff is because ________. A) a physical measure such as volume is difficult to estimate than sales value B) physical volume usually has little relationship to the revenue producing power of products C) a physical measure usually results in less costs being allocated to the product that weighs the most D) customers will easily understand that the products are overpriced

b

An example of allocating joint costs using physical measures is allocating joint costs based on ________. A) sales value at splitoff point B) volume of the products C) constant gross-margin percentage D) net realizable value

b

Outputs with a negative sales value are ________. A) added to cost of goods sold B) added to joint production costs and allocated to joint or main products C) added to joint production costs and allocated to byproducts and scrap D) subtracted from product revenue

b

The physical-measure method ________. A) allocates joint costs to joint products in a way that each product has an identical gross-margin percentage B) allocates joint costs to joint products on the basis of a comparable physical measure at the splitoff point C) allocates joint costs to joint products on the basis of the relative sales value at the splitoff point D) allocates joint costs to joint products on the basis of relative NRV

b

The benefits-received criteria for allocating joint costs indicate market-based measures are preferred because ________. A) physical measures such as quantity are clear bases for allocating cost than other measures B) physical measures are more difficult to calculate C) revenues are usually the best indicators of the benefits received D) revenues always remain consistent over short-run

c

Which of the following statements is true of the methods for allocating joint costs? A) The net realizable value method uses the sales value of the units sold during the accounting period to allocate joint costs. B) The sales value at splitoff method always results in the same gross-margin percentage for all products. C) The sales value at splitoff method allocates joint costs to each product in proportion to the sales value of total production. D) The net realizable value method results in the same joint production cost per unit for all products.

c

The constant gross-margin percentage NRV method of joint cost allocation ________.

computes gross margin before allocating the costs to the products

Which of the following statements is true in regard to the cause-and-effect relationship between allocated joint costs and individual products? A) A high individual product value results in a high level of joint costs. B) A low individual product value results in a low level of joint costs. C) A high individual product value results in a low level of joint costs. D) There is no cause-and-effect relationship.

d

Which of the following statements is true of the methods for allocating joint costs? A) Constant gross-margin percentage method results in same joint production cost per unit for all products. B) Estimated net realizable value method results in same gross margin percentage for all products. C) Present value allocation method is the least preferred method due to its complex calculations. D) Sales value at splitoff method uses the sales value of the entire production of the accounting period to allocate costs.

d

When a product is the result of a joint process, the decision to process the product past the splitoff point further should be influenced by the ________.

extra operating income earned past the splitoff point

(True or False) All products yielded from joint product processing have some positive value to the firm.

false

(True or False) Classification of main products, joint products, and byproducts can always be done with ease.

false

(True or False) If the value of a byproduct drops significantly, it could also be viewed as a joint product.

false

(True or False) Joint costs are incurred beyond the splitoff point and are assignable to individual products.

false

(True or False) One of the reasons to allocate joint costs to individual products is to aid in the preparation of tax returns.

false

(True or False) Separable costs include manufacturing costs only.

false

(True or False) The juncture in a joint production process when two products become separable is the byproduct point.

false

The drawback of the constant gross-margin percentage NRV method in joint costing is that ________.

it assumes the profit margin to be identical across all products

(True or False) Allocating joint costs to individual products can be helpful for litigation settlement purposes in which the costs of joint products or services are key inputs.

true

(True or False) Before the splitoff point, decisions relating to the sale or further processing of each identifiable product cannot be made independently of decisions about the other products.

true

(True or False) Joint costing allocates the joint costs to the individual products that are eventually sold.

true

(True or False) Joint costs are the costs of a production process that yields multiple products simultaneously.

true

(True or False) When a joint production process yields two or more products with high total sales values, these products are called joint products.

true