ACC 622 C16

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Which of the following are two major methods to account for​ byproducts? A. Production method and net realizable value method. B. Sales value at splitoff method and net realizable value method. C. Production method and sales method. D. Sales method and constant​ gross-margin percentage method.

C

Describe a situation in which the sales value at splitoff method cannot be used but the NRV method can be used for​ joint-cost allocation. A. This situation can occur when a production process yields separable outputs at the splitoff point that do not have selling prices available until further processing. The result is that selling prices are not available at the splitoff point to use the sales value at splitoff method. Examples include processing in integrated pulp and paper companies and in​ petro-chemical operations. B. This situation can occur when a production process yields separable outputs at the spiltoff point where each product has a selling price. The company will then determine the NRV based on the selling price. An example is a dairy purchases raw milk from individual farms and processes it until the splitoff​ point, when two​ products, cream and liquid skim emerge. C. This situation can occur when a production process allocates joint costs to joint products produced during the accounting period on the basis of a comparable physical​ measure, such as the relative​ weight, quantity, or volume at the splitoff point. The result is that selling prices at the splitoff point are not available. Examples include a gold mine that extracts ore containing​ gold, silver, and lead. Use of a common physical measure​ (tons) would result in almost all costs being allocated to​ lead, the product that weighs the most but has the lowest​ revenue-generating power. D. None of the above are correct.

A

Why does the sales value at splitoff method use the sales value of the total production in the accounting period and not just the revenues from the products​ sold? A. The joint production process yields individual products that are either sold this period or held as inventory to be sold in subsequent periods.​ Hence, the joint costs need to be allocated between total production rather than just those sold this period. B. The joint production process yields multiple products that are processed beyond the splitoff point to bring them to a marketable form.​ Hence, the joint costs were incurred on all units​ produced, not just the portion sold during the current period. C. The sales value at splitoff method uses the sales value of the total production in the accounting period and not just the revenues from the products sold because the selling prices for one or more products at splitoff do not exist. D. The sales value at splitoff method use the sales value of the total production in the accounting period and not just the revenues from the products sold because the value is dependent on the relative​ weight, quantity, or volume at the splitoff point.

A

Why is the constant​ gross-margin percentage NRV method sometimes called a​ "joint-cost-allocation and a​ profit-allocation" method? A. The constant​ gross-margin percentage NRV method takes account of the​ post-splitoff point​ "profit" contribution earned on individual​ products, as well as joint​ costs, when making cost assignments to joint products. In​ contrast, the sales value at splitoff point and the NRV methods allocate only the joint costs to the individual products. B. The sales value at splitoff point and the NRV method takes account of the​ post-splitoff point​ "profit" contribution earned on individual​ products, as well as joint​ costs, when making cost assignments to joint products. In​ contrast, the constant​ gross-margin percentage NRV method allocates only the joint costs to the individual products. C. The​ physical-measure method and the NRV method takes account of the​ post-splitoff point​ "profit" contribution earned on individual​ products, as well as joint​ costs, when making cost assignments to joint products. In​ contrast, the constant​ gross-margin percentage NRV methods allocate only the joint costs to the individual products. D. None of the above.

A

What is a joint​ cost? What is a separable​ cost? A ▼ joint separable cost is a cost of a production process that yields multiple products simultaneously. A ▼ joint separable cost is a cost incurred beyond the splitoff point that is assignable to each of the specific products identified at the splitoff point.

A joint cost is a cost of a production process that yields multiple products simultaneously. A separable cost is a cost incurred beyond the splitoff point that is assignable to each of the specific products identified at the splitoff point.

Distinguish between a joint product and a byproduct. A ▼ byproduct joint product is a product from a process that yields two or more products that has a relatively high total sales value. A ▼ byproduct joint product is a product that has a relatively low total sales value compared to the total sales value of the main products.

A joint product is a product from a process that yields two or more products that has a relatively high total sales value. A byproduct is a product that has a relatively low total sales value compared to the total sales value of the main products.

Select three reasons for allocating joint costs to individual products or services. Cost reimbursement under contracts when only a portion of a​ business's products or services is sold or delivered under​ cost-plus contracts. Computation of inventoriable costs and cost of goods sold for financial accounting purposes and reports for income tax authorities. Computation of inventoriable costs and cost of goods​ sold, only for external reporting purposes. Rate regulation when one or more of the​ jointly-produced products or services are subject to price regulation. Computation of cost of goods sold and gross margin for external auditors and production supervisors.

ABD

Select two limitations of the​ physical-measure method of​ joint-cost allocation. A. 1. The physical weights used for allocating joint costs may have no relationship to the​ revenue-producing power of the individual products. 2. The byproducts are often included in the denominator used because of their low sales values relative to the joint products. B. 1. The physical weights used for allocating joint costs may have no relationship to the​ revenue-producing power of the individual products. 2. The joint products may not have a common physical denominatorlong dash—for ​example, one may be a liquid while another a solid with no readily available conversion factor. C. 1. Obtaining comparable physical measures for all products is not always straightforward. 2. The byproducts are often included in the denominator used because of their low sales values relative to the joint products. D. There are no limitations for using the​ physical-measure method for​ joint-cost allocation.

B

​"Managers must decide whether a product should be sold at splitoff or processed further. The sales value at splitoff method of​ joint-cost allocation is the best method for generating the information managers need for this​ decision." Do you​ agree? Explain. A. No. A method that allocates joint costs based on a comparable physical​ measure, such as the relative​ weight, quantity, or volume at the splitoff point provides more relevant information to managers. There is a correlation between sales value per ton the amount of profit.​ Therefore, high sales value per ton generate large profits and low sales value per ton generate sizable losses. B. No. Any method used to allocate joint costs to individual products that is applicable to the problem of joint​ product-cost allocation should not be used for management decisions regarding whether a product should be sold or processed further. The only relevant items for these decisions are the incremental revenue and the incremental costs beyond the splitoff point. C. Yes. The sales value at splitoff method of​ joint-cost allocation is the best method and uses the sales value from the entire production period​, not just the quantity sold. Because the sales value at splitoff method follows the​ benefits-received criterion of cost​ allocation, this method provides more relevant information for managers. D. Yes. The sales value at splitoff method of​ joint-cost allocation is the only method for generating the information managers need for this decision. The sales value at splitoff is always known. The sales information is relevant to the managers and provide valuable information in making their decision.

B

Which of the following is true about the sales value at splitoff method and the NRV​ method? A. The sales value at splitoff method allocates joint costs to joint products on the basis of the relative total sales value at the splitoff point of the total production of these products during the accounting period. B. The net realizable value method allocates joint costs to joint products on the basis of the relative net realizable value​ (the final sales value minus the separable costs of production and​ marketing) of the total production of the joint products during the accounting period. C. Both A. and B. D. Neither A. and B.

C

Why might the number of products in a​ joint-cost situation differ from the number of​ outputs? Give an example. A. The number of products can differ from the number of outputs when the joint production of one product produces multiple outputs. All of these outputs generate​ revenues, such as the offshore processing of hydrocarbons yields purified water that is bottled as well as yielding oil and gas. B. The number of products can differ from the number of output when the joint production process of two or more products become separately unidentifiable. Therefore a company can have multiple outputs with only one product having a positive sales value. If multiple kinds of timber​ (logs) are processed into standard lumber and wood​ chips, standard lumber is the one product that has positive sales and wood chips are the recycled back into the environment. C. A product is any output that has a positive sales value​ (or an output that enables a company to avoid incurring​ costs). In some​ joint-cost settings, outputs can occur that do not have a positive sales value. The offshore processing of hydrocarbons yields water that is recycled back into the ocean as well as yielding oil and gas. D. A product is any output that has a positive sales value​ (or an output that enables a company to avoid incurring​ costs). The products of a joint production process that have low total sales values compared with the total sales value of the main product or of joint products are called byproducts. The​ fine-grade lumber and standard lumber are joint products and the wood chips are byproducts.

C

​"Managers should consider only additional revenues and separable costs when making decisions about selling at splitoff or processing​ further." Do you​ agree? Explain. A. ​Yes, the only relevant items are incremental revenues and incremental costs when making decisions about selling products at the splitoff point or processing them further. Separable costs are always identical to incremental costs B. ​No, the only relevant item is incremental revenues when making decisions about selling products at the splitoff point or processing them further. C. ​No, the only relevant items are incremental revenues and incremental costs when making decisions about selling products at the splitoff point or processing them further. Separable costs are not always identical to incremental costs. D. ​No, the only relevant item is incremental costs when making decisions about selling products at the splitoff point or processing them further.

C

How might a company simplify its use of the NRV method when final selling prices can vary sizably in an accounting period and management frequently changes the point at which it sells individual​ products? The NRV method can be simplified by assuming a ▼ standard variable set of​ post-splitoff point processing​ steps, and a ▼ standard variable set of selling prices.

The NRV method can be simplified by assuming a standard set of​ post-splitoff point processing​ steps, and a standard set of selling prices.


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