Chapter 16 Cost Accounting Cost Allocation: Joint Products and Byproducts

Which of the following is true of the physical-measure approach of allocating joint costs? A) Costs cannot be allocated if the measurement basis for each product are different. B) Physical measures usually result in less costs being allocated to the product that weighs the most. C) The physical measure reflects a product's ability to generate revenues. D) Obtaining comparable physical measures for all products is always straightforward.

A) Costs cannot be allocated if the measurement basis for each product are different

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) The costs of a production process that yields multiple products simultaneously are called joint costs

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) allocates joint costs to joint products on the basis of the relative total sales value at the splitoff point

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) rate regulation requlation requirements

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 manufacturer may allocate a large portion of its other costs to these products

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) added to joint production costs and allocated to joint or main products

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) 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

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. C) It records revenues of the byproduct in the income statement as revenue. D) It adds revenues of the byproduct to the cost of goods sold in the income statement.

B) It is the preferred method because of the matching principle

In joint costing, the ________ assumes that all the markup is attributable to the joint process costs. A) sales value at splitoff method B) NRV method C) constant gross-margin percentage method D) physical measures method

B) NRV method

When the selling prices of all products at the splitoff point are unavailable, the ________ is the best alternative for allocating joint costs. A) sales value at splitoff method B) NRV method C) physical measures method D) constant gross-margin percentage method

B) NRV method

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) allocates joint costs to joint products on the basis of a compatable physical measure at the splitoff point

The constant gross-margin percentage NRV method of joint cost allocation ________. A) involves allocating costs in such a way that maintaining the same gross margin percentage for each product that was obtained in prior years B) computes gross margin before allocating the costs to the products C) is the same as the estimated NRV method D) is the same as the sales-value at splitoff method

B) computes gross margin before allocating the costs to the products

The drawback of the constant gross-margin percentage NRV method in joint costing is that ________. A) it recognizes that profits are derived from the costs incurred after splitoff B) it assumes the profit margin to be identical across all products C) it attempts to approximate the sales values at splitoff by subtracting from final selling prices the separable costs incurred after the splitoff point D) it ignores the separable costs of further processing

B) it assumes the profit margin to be identical across all products

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) joint cost

In joint costing, the potential conflict 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. A) sales value at splitoff B) physical measure C) constant gross-margin percentage NRV D) estimated NRV

B) physical measure

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) physical volume usually has little relationship to the revenue producing power of products

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) volume of the products

Which of the following journal entries can happen only under the production method of recording byproducts? A) Work in Process Finished Goods - Byproduct Accounts Payable B) Cash or Accounts Receivable Revenues - Main product C) Byproduct Inventory Finished Goods - Main product Work in Process D) Cash or Accounts Receivable Revenues - Byproduct

C) Byproduct Inventory Finished Goods - Main product

Why do accountants criticize the practice of carrying inventories at estimated net realizable values? A) The costs of producing the products are usually estimates. B) There is usually no clearly defined realizable value for any inventories. C) In effect, this practice recognizes income before sales are made. D) It will result in higher cost of goods sold and lesser profits

C) In effect, this practice recognizes income before sales are made

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) It is the juncture in a joint production process when two or more products become separately indentifiable

________ 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) Percentage of total sales value

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) Product classifications may change over time

Which of the following statements is true of the methods for allocating joint costs? A) The sales value at splitoff method lacks a common basis for allocating joint costs to products. B) The complexity of the sales value at splitoff method increases when managers make frequent changes to the sequence of post-splitoff processing decisions. C) The NRV method assumes that none of the markup is attributable to the separable costs. D) The NRV method treats the joint products as though they comprise a single product.

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

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 sales value at splitoff method allocates joint costs to each product in proportion to the sales value of total production

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) at the splitoff point

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) byproducts

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) main product becomes technologically obsolete

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) main products and byproducts

A negative consequence of recording byproducts in the accounting records when the sale occurs is that ________. A) the revenue from the byproducts is usually fairly large and the accounting records will be distorted B) earnings cannot be timed under this method C) managers can be tempted to stockpile byproducts D) it involves complex calculations compared to the production method

C) managers can be tempted to stockpile byproducts

Which method of accounting recognizes byproducts in the financial statements at the time their production is completed? A) gross margin method B) sales method C) production method D) market value method

C) production method

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) revenues are usually the best indicators of the benefits recieved

Which of the methods of allocating joint costs usually is considered the simplest to implement? A) estimated net realizable value B) constant gross-margin percentage NRV C) sales value at splitoff D) physical measures

C) sales value at splitoff

What factor most often drives joint cost allocation? A) performance evaluation B) manager compensation C) selling prices D) simplicity of the method

C) selling prices

Which of the following statements is true of sell-or-process-further decisions in joint costing? A) Joint costs incurred before the splitoff point are relevant in deciding whether to process the product further. B) All separable costs in joint-cost allocations are incremental costs. C) Separable costs incurred before the splitoff point are irrelevant in deciding whether to process the product further. D) Costs that differ between the alternatives of selling products or processing further are relevant.

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

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) Sales value at splitoff method uses the sales value of the entire production of the accounting period to the allocated costs

Which of the following statements is true of the methods for allocating joint costs? A) Under the cause-and-effect criterion, the physical-measure method is highly desirable. B) Byproducts are never excluded from the denominator used in the physical-measure method. C) The NRV method is never used when the selling prices of joint products vary frequently. D) The sales value at splitoff method follows the benefits-received criterion of cost allocation.

D) The sales value at splitoff method follows the benefits-recieved criterion of cost allocation

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) There is no cause-and-effect

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 by products 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) When a joint production process yielfs two or more products with high total sales values relative to the total sales values of other products those products are called joint products/

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) allocates joint costs to joint products on the basis of relative NRV

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

D) byproducts

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 ________. A) total amount of the joint costs B) portion of the joint costs allocated to the individual products C) extra revenue earned past the splitoff point D) extra operating income earned past the splitoff point

D) extra operating income earned past the splitoff point

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) net realizable value

In joint costing, the sales value at splitoff method is used frequently ________. A) in a dynamic business environment where the selling prices change frequently B) in anticipation of subsequent management decisions C) when selling prices are dependent on further processing decisions D) since the selling-price data exists at the splitoff

D) since the selling-price data exists at the splitoff