Cost Acct Chapter 16
The ________ point is the juncture in a joint production process when two or more products become separately identifiable. A) splitoff B) joint product C) process D) end
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
A criticism of the practice of carrying inventories at estimated net realizable values is that this practice recognizes income before sales are made. TRUE/FALSE
T
At or beyond the splitoff point, decisions relating to the sale or further processing of each identifiable product can be made independently of decisions about the other products. TRUE/FALSE
T
Byproducts are recognized in the general ledger either at the time production is completed or at the timE of sale. TRUE/FALSE
T
If the value of a joint product drops significantly, it could also be viewed as a byproduct TRUE/FALSE
T
Joint costs are the costs of a production process that yields multiple products simultaneously. TRUE/FALSE
T
Litigation may be a reason that joint costs are allocated to individual products. TRUE/FALSE
T
All of the following changes may indicate a change in product classification of a manufacturing process which has a splitoff point EXCEPT a: A) byproduct increases in sales value due to a new application B) main product becomes a joint product C) main product becomes technologically obsolete D) byproduct loses its market due to a new invention
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
All products yielded from joint product processing have some positive value to the firm. TRUE/FALSE
F
All separable costs in joint-cost allocations are always incremental costs. TRUE/FALSE
F
An advantage of the physical-measure method is that obtaining physical measures for all products is an easy task. TRUE/FALSE
F
The juncture in a joint production process when two products become separable is the byproduct point. TRUE/FALSE
F
The net realizable value (NRV) method allocates joint costs to joint products produced during the accounting period on the basis of their relative NRV— final sales value plus separable costs TRUE/FALSE
F
The only allowable method of joint cost allocation is specified by FASB. TRUE/FALSE
F
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 joint products. TRUE/FALSE
F
The sales value at splitoff method is an example of allocating costs using physical measures. TRUE/FALSE
F
The net realizable value method is generally used for products or services that are processed and after splitoff additional value is added to the product and a selling price can be determined. TRUE/FALSE
T
The production method for recognizing byproducts is conceptually correct in that it is consistent with the matching principle. TRUE/FALSE
T
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. TRUE/FALSE
T
The sales value at splitoff method enables the accountant to obtain individual product costs and gross margins. TRUE/FALSE
T
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) involves allocating costs in such a way that the overall gross margin percentage is identical for the individual products C) is the same as the estimated NRV method D) is the same as the sales-value at splitoff method
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
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
When a joint production process yields two or more products with high total sales values, these products are called: A) main products B) joint products C) byproducts D) scrap
B
Which statement is NOT true regarding the sales method of accounting for byproducts. A) the method makes no journal entries until the byproduct is sold B) this method is the preferred method because of the matching principle C) revenues of the byproduct can be recorded in the income statement as revenue D) revenues of the byproduct can be recorded as a reduction of cost of goods sold in the income statement
B
All of the following methods may be used to allocate joint costs EXCEPT the: A) constant gross-margin percentage method B) estimated net realizable value method C) present value allocation method D) sales value at splitoff method
C
Byproducts and main products are differentiated by the: A) number of units per processing period B) weight or volume of outputs per period C) amount of total sales value D) None of these answers is correct.
C
The benefits-received criteria for allocating joint costs indicate market-based measures are preferred because: A) physical measures such as volume are a clearer basis for allocating cost than other measures B) other measures are more difficult to calculate C) revenues are usually the best indicator of the benefits received D) None of these answers is correct.
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
What factor most often drives joint cost allocation? A) performance evaluation B) manager compensation C) selling prices D) simplicity of the method
C
What is the reason that accountants do NOT like to carry inventory at net realizable value? A) NRV is the most difficult costing method B) NRV recognizes income after the sale is complete C) NRV recognizes income before sales are made D) NRV is acceptable to the taxing authorities
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 cost allocation method should NOT be used to eliminate the conflict between decision making and performance evaluation? A) sales value at splitoff B) NRV C) physical measures D) constant gross-margin percentage NRV
C
Which method of accounting recognizes byproducts in the financial statements at the time their production is completed? A) production allocation method B) sale method C) production method D) None of these answers is correct.
C
Which of the following is NOT a market-based approach to allocating costs? A) sales value at splitoff B) constant gross-margin percentage NRV C) physical measures D) net realizable value
C
Which of the following statements is true regarding main products and byproducts? A) Product classifications do not change over the short run. B) Product classifications do not change over the long run. C) Product classifications may change over time. D) The cause-and-effect criterion determines the classification.
C
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) All of these answers are correct.
C
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 these inventories. C) The effect of this practice is to recognize income before sales are made. D) All of these answers are correct.
C
A business which enters into a contract to purchase a product (or products) and will compensate the manufacturer under a cost reimbursement formula, should take an active part in the determination of how joint costs are allocated because: A) the manufacturer will attempt to allocate as large a portion of its costs to these products B) if the manufacturer successfully allocates a large portion of its costs to these products then it will be able to sell its other nonreimbursed products at lower prices C) the FASB requires the business to participate in the cost allocation process D) Both A and B are correct.
D
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) managers can time earnings by their decision when to sell byproducts C) managers have an incentive to stockpile byproducts D) Both B and C are correct.
D
A reason why a physical-measure to allocate joint costs is less preferred than the sales value at splitoff is: A) a physical measure such as volume is difficult to estimate because of shrinkage B) physical volume usually has little relationship to the revenue producing power of products C) a physical measure usually results in the costs being allocated to the product that weighs the most D) All of these answers are correct.
D
All costs incurred beyond the splitoff point that are assignable to one or more individual products are called: A) byproduct costs B) joint costs C) main costs D) separable costs
D
An example of a market-based approach to allocating joint costs is (are) allocating joint costs based on: A) sales value at splitoff method B) physical volume C) constant gross-margin percentage method D) Both A and C are correct.
D
If managers make decisions to sell or process further using an incremental revenue/incremental cost approach, which method will show each product budgeted to have a positive (or zero) operating income on the resulting budgeted product-line income statement? A) sales value at splitoff B) estimated NRV C) constant gross-margin percentage NRV D) All of these answers are correct.
D
In joint costing: A) costs are assigned to individual products as assembly of the product occurs B) costs are assigned to individual products as disassembly of the product occurs C) a single production process yields two or more products D) Both B and C are correct.
D
Industries that recognize income on each product when production is completed include: A) mining B) toy manufacturers C) canning D) Both A and C are correct.
D
Outputs with zero sales value are accounted for by: A) listing these various outputs in a footnote to the financial statements B) including the items as a relatively small portion of the value assigned to the products produced during the accounting period C) making journal entries to reflect an estimate of possible values D) None of these answers is correct.
D
Products with a relatively low sales value are known as: A) scrap B) main products C) joint products D) byproducts
D
Proper costs allocation for inventory costing and cost-of-goods-sold computations are important because: A) inventory costing is essential for proper balance sheet presentation B) most states have laws requiring proper balance sheet presentation and recommended allocation methods C) cost of goods sold is an important component in the determination of net income D) Both A and C are correct.
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
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
Which of the following is NOT a primary reason for allocating joint costs? A) cost justification and insurance settlement cost information requirements B) cost justification and asset measurement C) income measurement and rate regulation requirements D) to calculate the bonus of the chief executive officer
D
Which of the following is NOT a reason to use the sales value at splitoff method: A) simplicity B) no anticipation of subsequent management decisions C) measurement of the value of the joint products at the splitoff point D) All of the above are reasons to use the sales value at splitoff method.
D
Which of the following is a reason to allocate joint costs? A) rate regulation requirements, if applicable B) cost of goods sold computations C) insurance settlement cost information requirements D) All of these answers are correct.
D
Which of the following methods of allocating costs use market-based data? A) Sales value at splitoff method B) Estimated net realizable value method C) The constant gross-margin percentage method D) All of these answers are correct.
D
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
Joint costs are NOT allocated to individual products for the preparation of tax returns. TRUE/FALSE
F
Joint costs are incurred beyond the splitoff point and are assignable to individual products. TRUE/FALSE
F
Joint costs that do NOT differ between alternatives are particularly relevant for decision making. TRUE/FALSE
F
Joint processing costs are always relevant for pricing decisions of the final product. TRUE/FALSE
F
Physical measures such as weight or volume are the best indicator of the benefits received for allocating joint costs. TRUE/FALSE
F
Separable costs include manufacturing costs only. TRUE/FALSE
F
The constant gross-margin percentage NRV method allocates joint costs to joint products in such a way that the gross margin on each joint product is the same as it was in the previous year. TRUE/FALSE
F
The constant gross-margin percentage method differs from market-based joint-cost allocation method (sales value at splitoff and estimated net realizable value) since no account is taken of profits earned before or after the splitoff point when allocating joint costs. TRUE/FALSE
F
The focus of joint costing is assigning costs to individual products as assembly occurs. TRUE/FALSE
F
The sales value at splitoff method presupposes the exact number of subsequent steps undertaken for further processing. TRUE/FALSE
F
A sound reason for reporting revenue from byproducts as an income statement item at the time of sale is to lessen the chance of managers managing reported earnings. TRUE/FALSE
FALSE
Separable costs are incurred beyond the splitoff point that are assignable to each of the specific products identified at the splitoff point. TRUE/FALSE
T
The constant gross-margin percentage NRV method allocates joint costs to joint products produced during the accounting period in such a way that each individual product achieves an identical gross-margin percentage. TRUE/FALSE
T
The constant gross-margin percentage NRV method is the only method of allocating joint costs under which products may receive negative allocations. TRUE/FALSE
T
The constant gross-margin percentage NRV method makes the simplifying assumption of treating the joint products as though they comprise a single product. TRUE/FALSE
T
The estimated net realizable value method is used when the market selling prices at the splitoff point are NOT available. TRUE/FALSE
T
The sales value at splitoff method allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point. TRUE/FALSE
T
The sales value at splitoff method is preferable when selling-price data exists at split. TRUE/FALSE
T
The sales-value at splitoff method of joint cost allocation involves computation of the relative amounts of the sales value of the amount of each joint product sold during the period. TRUE/FALSE
T
A byproduct is one or more products of a joint production process that have low total sales value compared to the total sales value of the main product or joint products. TRUE/FALSE
TRUE
The production method of accounting for byproducts recognizes byproducts in the financial statements at the time when production is completed. TRUE/FALSE
TRUE