Cost Accounting, 15e Global Edition (Horngren/Datar/Rajan)
Chapter 16 Cost Allocation: Joint Products and Byproducts
Objective 16.1
1) 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
2) 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.
3) 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.
4) 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
5) 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.
6) 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
7) 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.
8) 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
9) ________ 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
10) 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
11) Products with a relatively low sales value are known as ________.
A) primary products
B) main products
C) joint products
D) byproducts
12) 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.
13) 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
14) Joint costs are incurred beyond the splitoff point and are assignable to individual products.
15) Joint costing allocates the joint costs to the individual products that are eventually sold.
16) Separable costs include manufacturing costs only.
17) Classification of main products, joint products, and byproducts can always be done with ease.
18) Joint costs are the costs of a production process that yields multiple products simultaneously.
19) The juncture in a joint production process when two products become separable is the byproduct
point.
20) 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.
21) When a joint production process yields two or more products with high total sales values, these
products are called joint products.
22) All products yielded from joint product processing have some positive value to the firm.
23) If the value of a byproduct drops significantly, it could also be viewed as a joint product.
24) In each of the following industries, identify possible joint (or severable) products at the splitoff point.
a. Coal
b. Petroleum
c. Dairy
d. Lamb
e. Lumber
f. Cocoa Beans
g. Christmas Trees
h. Salt
i. Cowhide
25) Define the terms main product, joint product, and byproduct. Give at least one example of each type
of product.
26) Silver Company uses one raw material, silver ore, for all of its products. It spends considerable time
getting the silver from the ore before it starts the actual processing of the finished products, rings, lockets,
etc. Traditionally, the company made one product at a time and charged the product with all costs of
production, from ore to final inspection. However, in recent months, the cost accounting reports have
been somewhat disturbing to management. It seems that some of the finished products are costing more
than they should, even to the point of approaching their retail value. It has been noted by the accounting
manager that this problem began when the company started buying ore from different parts of the world,
some of which require difficult extraction methods.
Required:
Can you explain how the company might change its accounting system to reflect the reporting problems
better? Are there other problems with the purchasing area?
27) What are joint costs, separable costs, and a splitoff point?
28) Discuss in brief how easy it is for companies to classify products as main products, joint products, and
byproducts.
29) Explain the difference between a joint product and a byproduct. Can a byproduct ever become a joint
product? Also, can a joint product ever become a byproduct?
Objective 16.2
1) 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
2) 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
3) One of the reasons to allocate joint costs to individual products is to aid in the preparation of tax
returns.
4) 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.
5) List three reasons why we allocate joint costs to individual products or services. Give an example of
when the particular cost allocation reason would come into use.
6) What are the reasons for allocating joint costs to individual products or services?
Objective 16.3
1) 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.
2) 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
3) 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
4) 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
5) 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.
6) 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
7) 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
8) 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.
9) 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
Answer the following questions using the information below:
Bismite Corporation purchases trees from Cheney lumber and processes them up to the splitoff point
where two products (paper and pencil casings) are obtained. The products are then sold to an
independent company that markets and distributes them to retail outlets. The following information was
collected for the month of October:
Trees processed: 250 trees
Production: paper 180,000 sheets
pencil casings 180,000
Sales: paper 174,000 at $0.12 per page
pencil casings 178,500 at $0.15 per casing
The cost of purchasing 250 trees and processing them up to the splitoff point to yield 180,000 sheets of
paper and 180,000 pencil casings is $12,500.
Bismite’s accounting department reported no beginning inventory.
10) What is the total sales value at the splitoff point for paper?
A) $26,775
B) $20,880
C) $21,600
D) $27,000
11) What is the total sales value at the splitoff point of the pencil casings?
A) $21,600
B) $27,000
C) $26,775
D) $20,880
12) What are the paper’s and the pencil’s approximate weighted cost proportions using the sales value at
splitoff method, respectively?
A) 50.00% and 50.00%
B) 33.33% and 66.67%
C) 31.82% and 68.18%
D) 44.44% and 55.56%
13) If the sales value at splitoff method is used, what are the approximate joint costs assigned to ending
inventory for paper?
A) $185.17
B) $57.87
C) $175.38
D) $57.78
14) If the sales value at splitoff method is used, what is the approximate production cost for each pencil
casing?
A) $0.309
B) $0.301
C) $0.031
D) $0.039
15) If the sales value at splitoff method is used, what is the approximate production cost for each paper
sheet?
A) $0.309
B) $0.301
C) $0.031
D) $0.039
Answer the following questions using the information below:
The Berkel Corporation manufactures Widgets, Gizmos, and Turnbols from a joint process. June
production is 5,000 widgets; 8,750 gizmos; and 10,000 turnbols. Respective per unit selling prices at
splitoff are $75, $50, and $25. Joint costs up to the splitoff point are $187,500.
16) If joint costs are allocated based upon the sales value at splitoff, what amount of joint costs will be
allocated to the widgets?
A) $30,882
B) $66,176
C) $44,118
D) $77,206
17) What amount of joint costs will be allocated to the Turnbols?
A) $44,118
B) $30,882
C) $77,206
D) $66,176
18) What amount of joint costs will be allocated to the Gizmos?
A) $44,118
B) $30,882
C) $77,206
D) $66,176
19) 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
Answer the following questions using the information below:
The Alfarm Corporation processes raw milk up to the splitoff point where two products, cream and
liquid skim, are produced and sold. There was no beginning inventory. The following material was
collected for the month of February:
Direct materials processed: 750,000 gallons (727,500 gallons of good product)
Production: Cream 442,500 gallons
Liquid skim 285,000 gallons
Sales: Cream 421,500 at $110 per gallon
Liquid skim 273,000 at $100 per gallon
The cost of purchasing 750,000 gallons of direct materials and processing it up to the splitoff point to
yield a total of 727,500 gallons of good product was $2,280,000.
20) What are the physical-volume proportions to allocate joint costs for cream and liquid skim,
respectively?
A) 59.00% and 41.00%
B) 60.82% and 39.18%
C) 50.00% and 50.00%
D) 59.79% and 40.21%
21) When using a physical-volume measure, what is the approximate amount of joint costs that will be
allocated to cream and liquid skim?
A) $1,386,804 and $893,196
B) $1,140,000 and $1,140,000
C) $1,368,000 and $912,000
D) $1,254,00 and $1,026,000
22) When using the physical-volume method, what is Cream’s approximate production cost per gallon?
A) $3.03
B) $3.31
C) $3.13
D) $3.21
23) Which of the following statements about Alfarm’s joint production costs is true?
A) The gross-margin percentage per gallon of Cream and Liquid skim are equal because joint costs are
allocated based on the number of gallons.
B) The gross-margin percentage per gallon of Cream is higher than gross margin percentage per gallon of
Liquid skim because of Cream’s higher production volume.
C) The joint production cost per gallon of Cream and Liquid skim are equal because joint costs are
allocated based on the number of gallons.
D) The joint production cost per gallon of Cream is higher than joint production cost per gallon of Liquid
skim because of Cream’s higher production volume.
Answer the following questions using the information below:
Netzone Company is in semiconductor industry and fabrication of silicon-wafer chips splits off two types
of memory chips, Standard and Premium. The following information was collected for last quarter of the
calendar year:
Direct materials processed: 200 kgs (Both standard and premium chips weigh 10 grams each)
Production: Standard 10,000 chips
Premium 6,500 chips
Sales: Standard 9,500 at $100 per chip
Premium 6,000 at $170 per chip
The cost of purchasing 200 kgs of direct materials and processing it up to the splitoff point to yield a total
of 16,500 chips of good products was $1,950,000.
Beginning inventories totalled 100 chips for Standard and 50 chips for Premium. Ending inventory
amounts reflected 100 chips of Standard and 50 chips of Premium. October costs per unit were the same
as November.
24) What are the physical-volume proportions for products Standard and Premium, respectively?
A) 60.00% and 40.00%
B) 55.00% and 45.00%
C) 60.61% and 39.39%
D) 54.00% and 46.00%
25) When using a physical-volume measure, what is the approximate amount of joint costs that will be
allocated Standard chips?
A) $1,170,000
B) $1,818,818
C) $975,000
D) $1,181,818
26) When using a physical-volume measure, what is the approximate amount of joint costs that will be
allocated Premium chips?
A) $768,182
B) $1,170,000
C) $975,000
D) $780,000
Answer the following questions using the information below:
The Green Company processes unprocessed goat milk up to the splitoff point where two products,
condensed goat milk and skim goat milk result. The following information was collected for the month of
October:
Direct Materials processed: 98,000 gallons (after shrinkage)
Production: Condensed goat milk 42,500 gallons
Skim goat milk 55,500 gallons
Sales: Condensed goat milk $3.50 per gallon
Skim goat milk $2.50 per gallon
The costs of purchasing the of unprocessed goat milk and processing it up to the splitoff point to yield a
total of 98,000 gallons of saleable product was $184,480. There were no inventory balances of either
product.
Condensed goat milk may be processed further to yield 42,000 gallons (the remainder is shrinkage) of a
medicinal milk product, Xyla, for an additional processing cost of $4 per usable gallon. Xyla can be sold
for $20 per gallon.
Skim goat milk can be processed further to yield 54,200 gallons of skim goat ice cream, for an additional
processing cost per usable gallon of $4. The product can be sold for $9 per gallon.
There are no beginning and ending inventory balances.
27) What is the estimated net realizable value of Xyla at the splitoff point?
A) $271,000
B) $287,400
C) $672,000
D) $712,600