Chapter 11

The net realizable value is also called the ___ ___ at split-off.

Sales value

When no sales values exist for the outputs at the split-off point, the ___ ___ ___ value should be determined by taking the sales value of each product at the first point at which it can be marketed.

Estimated Net Realizable

Processing costs incurred prior to the ___ ___-___ are the joint costs.

Split-off Point

The stage of processing at which the two products are separated is called the ___-___ -___.

Split-off Point

A company has $300,000 of joint costs for product A and product B. Product A's net realizable value = $400,000 and Product B's net realizable value = $600,000. The amount of joint cost allocated to product B is $ ____ .

180,000

Any cost center whose costs are not allocated to another cost center is called a(n) ___ cost center.

Final

Using the net realizable value, the ___ ___ as a percentage of sales is assumed to be equal for all products.

Gross Margin

The cost of a manufacturing process with two or more outputs is called a(n) ___ ___ .

Joint Costs

The outputs from a common input and common production process are called ___ ___.

Joint Products

When companies are subjected to regulations, the allocation of ___ ___ can be a significant factor in determining the regulated rates.

Joint costs

Joint costs are allocated based on the proportional values of the joint products at the split-off point when using the ___ ___ ___ method.

Net Realizable Value

The estimated net realizable value method is sometimes referred to as the ___ or ___ method.

Netback or workback

Given: Product A's net realizable value = $400,000 Product B's net realizable value = $600,000 The company has $300,000 of joint costs for product A and product B. The amount to be allocated to Department A is ______. a. $120,000 b. $150,000 c. $180,000

a. $120,000 = $400,000/$1,000,000 x $300,000

A company currently sells $800,000 of unassembled furniture, model A and model B. It is considering whether to sell model B assembled. Given the following, how much joint costs should be allocated to assembled model B? Sales value of unassembled Model B = $400,000 Sales value of assembled Model B = $500,000 Additional cost to assemble Model B = $100,000 Joint costs = $240,000 a. $120,000 b. $144,000 c. $133,333

a. $120,000 = ($400,000/$800,000) x $240,000

Which of the following statements are correct? a. No one allocation method is appropriate for all situations. b. Because it is arbitrary, allocating joint costs is rarely done in practice. c. It is impossible to separate joint costs attributable to products on a cause-and-effect basis.

a. No one allocation method is appropriate for all situations. c. It is impossible to separate joint costs attributable to products on a cause-and-effect basis.

When considering a sell or process further decision, management must consider ______. a. additional cost of processing further b. the joint costs for the intermediate stage c. additional revenue after processing further

a. additional cost of processing further c. additional revenue after processing further

Joint costs are allocated to determine ______ a. costs for evaluating executive performance b. the inventory value of products c. whether or not to outsource a department

a. costs for evaluating executive performance b. the inventory value of products

Regarding service department allocations, user departments can be ______ departments. a. production b. marketing c. other service d. other user

a. production b. marketing c. other service

The physical quantities method is used when ______. a. significant processing occurs between the split-off point and the first point of marketability b. output product prices are highly volatile c. there is insignificant processing occurring between the split-off point and the first point of marketability

a. significant processing occurs between the split-off point and the first point of marketability b. output product prices are highly volatile

When using the net realizable value method it is assumed that the gross margin as a percentage of sales is ______. a. the same for all products b. equal to the contribution margin c. proportionate to the amount of sales for each product

a. the same for all products

When it comes to accounting for by-products it is acceptable to ______. a. treat the proceeds from sale of the by-products as other revenue b. ignore all revenues and costs associated with the by-products c. deduct the net realizable value from the joint costs

a. treat the proceeds from sale of the by-products as other revenue c. deduct the net realizable value from the joint costs

Some companies make by-product accounting as easy as possible by expensing the by-products' costs in the period in which they are incurred and then recording the total revenue from them when they are sold. This accounting treatment ______. a. violates the matching principle b. still requires the net realizable value to be calculated c. allows the accountant not to keep an inventory of by-product processing costs

a. violates the matching principle c. allows the accountant not to keep an inventory of by-product processing costs

In deciding whether to sell goods now or process them further, the costs incurred to get the goods to this point ______ relevant to the decision. a. may or may not be b. are never c. are always

b. are never

Accounting for by-products attempts to ______. a. always ensure that by-products are treated as a reduction of the cost of the main products b. minimize recordkeeping for inventory valuation purposes c. reflect the economic relationship between the by-products and the main products

b. minimize recordkeeping for inventory valuation purposes c. reflect the economic relationship between the by-products and the main products

A company can sell a product for $150,000 at the split-off point or process it further to make a new product that sells for $200,000. The joint costs incurred prior to the split off point were $100,000 and the additional processing costs to produce the new product are $60,000. The difference in net income if the company decides to process further is ______. a. $90,000 b. $40,000 c. ($10,000)

c. ($10,000) = $200,000 - $150,000 - $60,000

A company is deciding whether or not to sell or process a product. The allocation method chosen to allocate joint costs incurred up to this point ______. a. make it unprofitable to sell the product without additional processing b. must be considered in making the decision c. are not relevant to the decision

c. are not relevant to the decision

Any cost center whose costs are charged to other departments in an organization is called a(n) ____ cost center.

intermediate

If allocated __ costs are used for decision-making purposes, there should be full recognition of their limitations.

joint

A company produces two products; A and B. The relative market values at the split-off point are not available. For every $300,000 of joint costs, product A produces 10,000 pounds and product B produces 40,000 pounds. The amount of joint costs allocated to product A is $___.

$60,000

Examples of service departments include:

- Human resources - Information System

A company produces two products; A and B. The relative market values at the split-off point are not available. For every $300,000 of joint costs, product A produces 10,000 pounds and product B produces 40,000 pounds. The amount of joint costs allocated to product A is $_____.

60,000

The outputs from joint production process that are relatively minor in quantity and/or value when compared to the main outputs are called ___-___.

By-Products

When joint costs are allocated based on measurement of the volume or weight of the joint products at the split-off point, the ___ ___ method is being used.

Physical Quantities

The two major methods for allocating joint costs are the net ___ ___ method and the ___ ___ method.

Realizable Value; Physical quantity

True or false: The difference between "net realizable value" and "estimated net realizable value" is whether or not the product can be sold at the split-off point.

True