Chapter 6 – Joint and by-product costing
MULTIPLE CHOICE
1. ____ are products with substantial value which are produced simultaneously by the same process up to
a split-off point.
a.
By-products
b.
Joint products
c.
Minor products
d.
Both a and b
2. The cost of crude oil used in producing gasoline products is an example of
a.
joint costs.
b.
a by-product.
c.
joint products.
d.
common cost allocation.
3. Which of the following industries would most likely have joint costs in production?
a.
flour milling
b.
dairy products
c.
commercial fishing
d.
all of the above
4. Joint costs are
a.
separable.
b.
allocated on the basis of cause and effect relationships.
c.
allocated arbitrarily.
d.
all of the above.
5. Joint products are
a.
indistinguishable before the split-off point.
b.
distinguishable before the split-off point.
c.
indistinguishable after the split-off point.
d.
distinguishable throughout the entire manufacturing process.
6. The ____ is where products become distinguishable after passing through a common process.
a.
work in progress
b.
relevant point
c.
break-even point
d.
split-off point
7. A ____ is a secondary product recovered in the course of manufacturing a primary product during a
joint process.
a.
by-product
b.
joint product
c.
main product
d.
both a and c
8. Which of the following is a by-product of agricultural and food Industries?
a.
meat
b.
flour
c.
fresh fish
d.
fertilizer
9. Which of the following would generally be a by-product?
a.
canned fish
b.
hamburger
c.
cow hides
d.
pineapples
10. Amos, SA., manufactures products A and B from a joint process. Joint product costs were £40,000
during the month of October. Additional information is as follows:
Sales Values at
Product
Units Produced
Split-Off
A
14,000
£110,000
B
6,000
£90,000
Amos uses the physical units method of joint cost allocation. What is the amount of joint product costs
to be allocated to products A and B in October, respectively?
a.
£20,000; £20,000
b.
£22,000; £18,000
c.
£28,000; £12,000
d.
£12,000; £28,000
11. Carey Ltd. manufactures products X and Y from a joint process. Joint product costs were £60,000
during the month of December. Additional information is as follows:
Sales Values at
Product
Units Produced
Split-Off per Unit
X
10,000
£24
Y
5,000
£8
What is the amount of joint product costs to be allocated to product X during December using the
physical units method?
a.
£20,000
b.
£45,000
c.
£15,000
d.
£40,000
Figure 6-1
Gilbert Production Company incurred £150,000 to manufacture the following products in a joint
process:
Selling Price
Product
Weight per Unit
per Unit
A
4 kgs.
£20
B
3 kgs.
40
C
2 kgs.
40
D
1 kgs.
20
12. Refer to Figure 6-1. How much joint cost would be allocated to product B based on the physical units
method?
a.
£150,000
b.
£30,000
c.
£45,000
d.
£50,000
13. Refer to Figure 6-1. How much joint cost would be allocated to product A based on total weight?
a.
£150,000
b.
£20,000
c.
£30,000
d.
£50,000
250 4 =
750 2 =
Figure 6-2
Foster Company incurred £200,000 to manufacture the following products in a joint process:
Selling Price
Product
Weight per Unit
per Unit
I
8 kgs.
£ 5
J
6 kgs.
10
K
4 kgs.
10
L
2 kgs.
5
14. Refer to Figure 6-2. How much joint cost would be allocated to product J based on total weight?
a.
£33,333
b.
£26,667
c.
£60,000
d.
£40,000
500 8 =
20,000
15. Refer to Figure 6-2. How much joint cost would be allocated to product L based on total weight?
a.
£33,333
b.
£26,667
c.
£40,000
d.
£44,444
16. Refer to Figure 6-2. How much joint cost would be allocated to Product K based on the total sales
value method?
a.
£13,334
b.
£80,000
c.
£26,666
d.
£60,000
17. The sales-value-at-split-off method allocates joint production costs based on each product’s share of
a.
revenues realized at the split-off point.
b.
costs realized at the split-off point.
c.
final sales value less further processing costs after the split-off point.
d.
units produced at the split-off point.
18. Amos, SA., manufactures products A and B from a joint process. Joint product costs were £40,000
during the month of October. Additional information is as follows:
Sales Value
Product
Units Produced
at Split-Off
A
14,000
£110,000
B
6,000
£90,000
Amos uses the sales-value-at-split-off method of joint cost allocation. What is the amount of joint
product costs to be allocated to products A and B in October, respectively?
a.
£20,000; £20,000
b.
£22,000; £18,000
c.
£28,000; £12,000
d.
£18,000; £22,000
Figure 6-3
£37,500
Bond Ltd., which manufactures products W, X, Y, and Z through a joint process costing £18,000, has
the following data for 2011:
Sales Value
Product
Units Produced
at Split-Off
W
10,000
£5,000
X
6,000
2,500
Y
16,000
3,000
Z
8,000
4,500
19. Refer to Figure 6-3. What is the amount of joint costs assigned to Product X using the
sales-value-at-split-off method?
a.
£18,000
b.
£10,000
c.
£3,000
d.
£2,700
20. Refer to Figure 6-3. What is the amount of joint costs assigned to Product Y using the
sales-value-at-split-off method?
a.
£7,200
b.
£3,600
c.
£18,000
d.
£1,200
21. Carey Ltd. manufactures Products X and Y from a joint process. Joint product costs were £60,000
during the month of December. Additional information is as follows:
Sales Value at
Product
Units Produced
Split-Off per Unit
X
10,000
£24
Y
5,000
£8
What is the amount of joint product costs to be allocated to Product X during December using the
sales-value-at-split-off method?
a.
£20,000
b.
£45,000
c.
£51,429
d.
£40,000
22. Which of the following methods allocates joint production costs based on their proportionate share of
eventual revenue less further processing costs?
a.
sales-value-at-split-off method
b.
net realizable value method
c.
physical units method
d.
replacement cost method
23. Which joint cost allocation method is described by the following statement?
Joint cost is prorated to the products on the basis of each product’s share of units.
a.
physical units method
b.
weighted average method
c.
sales-value-at-split-off method
d.
net realizable value method
24. Which joint cost allocation method is described by the following statement?
Joint cost is backed into. First, overall sales revenue minus overall costs (joint plus further processing
costs) is calculated to yield gross profit and the gross profit percentage. Then, each product is assigned
the same cost of goods sold percentage.
a.
constant gross margin method
b.
weighted average method
c.
sales-value-at-split-off method
d.
net realizable method
Figure 6-4
Deli Products produces two products, X and Y, in a single process. In 2011, the joint costs of this
process were £25,000. In addition, 4,000 units of X and 6,000 units of Y were produced. Separable
processing costs beyond the split-off point were: X-£10,000; Y-£20,000. X sells for £10.00 per unit; Y
sells for £7.50 per unit.
25. Refer to Figure 6-4. What amount of joint costs will be allocated to product X using the estimated net
realizable value method?
a.
£13,636
b.
£40,000
c.
£39,000
d.
£11,765
26. Refer to Figure 6-4. What is the gross profit of product Y assuming the net realizable value method is
used?
a.
£13,636
b.
£16,364
c.
£30,000
d.
£45,000
27. Refer to Figure 6-4. What is the gross profit of product Y assuming the physical units method is used?
a.
£25,000
b.
£-0-
c.
£10,000
d.
£15,000
Figure 6-5
Eden Company manufactures two products, Brights and Dulls, from a joint process. A production run
costs £50,000 and results in 250 units of Brights and 1,000 units of Dulls. Both products must be
processed past the split-off point, incurring separable costs for Brights of £60 per unit and £40 per unit
for Dulls. The market price is £250 for Brights and £200 for Dulls.
28. Refer to Figure 6-5. What is the amount of joint costs allocated to Brights using the net realizable
value method?
a.
£50,000
b.
£11,906
c.
£-0-
d.
£11,446
29. Refer to Figure 6-5. What is the amount of joint costs allocated to Dulls using the constant gross
margin percentage method?
a.
£15,000
b.
£40,000
c.
£50,000
d.
£10,000
30. Refer to Figure 6-5. What is the gross profit for Dulls assuming the constant gross margin percentage
method is used?
a.
£120,000
b.
£150,000
c.
£37,500
d.
£200,000
31. Refer to Figure 6-5. What is the gross profit for Brights assuming the physical units method is used?
a.
£62,500
b.
£12,500
c.
£47,500
d.
£37,500
Figure 6-6
Suppose that a sawmill processes logs into four grades of lumber totaling 500,000 board feet as
follows at a joint cost of £300,000:
Grade
Board Feet
Final Sales Value
First and second
75,000
£ 56,250
No. 1 common
200,000
180,000
No. 2 common
100,000
105,000
No. 3 common
125,000
127,500
32. Refer to Figure 6-6. What amount of joint costs will be allocated to No. 2 common using the constant
gross margin percentage method?
a.
£300,000
b.
£37,800
c.
£67,200
d.
£192,000
Revenues:
£468,750
Costs:
£300,000
33. Refer to Figure 6-6. What is the gross profit of No. 3 common if the constant gross margin percentage
method is used?
a.
£45,900
b.
£168,750
c.
£81,600
d.
£135,000
34. Refer to Figure 6-6. No. 2 common can be cut into 2 4s. The final sales value will increase to
£150,000. The cost of cutting No. 2 common is £15,000. Should the No. 2s be cut into 2 4s?
a.
Sell now.
b.
Cut into 2 4s; profits will increase £30,000.
c.
Cut into 2 4s; profits will increase £45,000.
d.
Cut into 2 4s; profits will increase £150,000.
Figure 6-7
Suppose that a concrete manufacturer produces four grades of concrete totaling 500,000 cubic yards as
follows at a joint cost of £2,000,000:
Grade
Cubic Yards
Sales Value
A
75,000
£ 375,000
B
200,000
1,200,000
C
100,000
700,000
D
125,000
850,000
35. Refer to Figure 6-7. What amount of joint costs will be allocated to Grade C using the constant gross
margin percentage method?
a.
£2,000,000
b.
£252,000
c.
£448,000
d.
£1,280,000
36. Refer to Figure 6-7. What is the gross profit of Grade D if the constant gross margin percentage
method is used?
a.
£306,000
b.
£1,125,000
c.
£544,000
d.
£900,000
37. Refer to Figure 6-7. What amount of joint costs will be allocated to Grade B using the final sales value
method?
a.
£2,000,000
b.
£768,000
c.
£800,000
d.
£240,000
38. Refer to Figure 6-7. Grade C can be made into bricks. The final sales value will increase to £900,000.
The additional cost to make the bricks is £250,000. Should the concrete be processed into bricks?
a.
Sell now.
b.
Produce bricks; profits will increase £200,000.
c.
Produce bricks; profits will increase £900,000.
d.
Produce bricks; profits will increase £450,000.
Additional revenues (£900,000 – £700,000)
Additional costs
Profits will decrease by
Figure 6-8
James Ltd. produces three products in a joint process: A, B, and C. The joint costs are as follows:
Direct materials
£50,000
Direct labour
20,000
Overhead
40,000
The split-off values for A, B, and C are £80,000, £100,000, and £60,000, respectively. If management
processes the three products beyond the split-off point, sales values for A, B, and C would increase to
£150,000, £130,000, and £120,000, respectively. In order to process the products further, the company
must incur separable costs of £14,000, £12,000, and £10,000 for products A, B, and C, respectively.
James uses the sales-value-at-split-off method to allocate joint costs.
39. Refer to Figure 6-8. Should James Ltd. process A further?
a.
Process further; profits will increase £56,000.
b.
Sell now.
c.
Process further; profits will increase £70,000.
d.
Process further; profits will increase £136,000.
Additional revenues (£150,000 – £80,000)
Additional costs
Profit increases
40. Refer to Figure 6-8. Should James Ltd. process B further?
a.
Process further; profits will increase £30,000.
b.
Process further; profits will increase £98,000.
c.
Process further; profits will increase £18,000.
d.
Sell now.
41. Refer to Figure 6-8. Should James Ltd. process C further?
a.
Process further; profits will increase £56,000.
b.
Process further; profits will increase £66,000.
c.
Process further; profits will increase £50,000.
d.
Sell now.
Additional revenues (£120,000 – £60,000)
£60,000
Additional costs
Profit increases
£50,000
42. Karl Body Parts produces three products in a joint process: Arms, Legs, and Heads. The joint costs are
as follows:
Direct materials
£25,000
Direct labour
10,000
Overhead
20,000
The hypothetical values for Arms, Legs, and Heads are £40,000, £50,000, and £30,000, respectively. If
management processes the three products beyond the split-off point, sales values for Arms, Legs, and
Heads would increase to £75,000, £65,000, and £60,000, respectively. In order to process the products
further, the company must incur separable costs of £7,000, £16,000, and £5,000 for products Arms,
Legs, and Heads, respectively. Karl uses the sales-value-at-split-off method to allocate joint costs.
Should Karl Body Parts process Arms further?
a.
Process further; profits will increase £28,000.
b.
Sell now.
c.
Process further; profits will increase £35,000.
d.
Process further; profits will increase £68,000.
Additional revenues (£75,000 – £40,000)
Additional costs
__7,000
Additional revenues (£130,000 – £100,000)
£30,000
Additional costs
Profit increases
£18,000