Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
33) The Arvid Corporation manufactures widgets, gizmos, and turnbols from a joint process. May
production is 4,000 widgets; 7,000 gizmos; and 8,000 turnbols. Respective per unit selling prices at splitoff
are $15, $10, and $5. Joint costs up to the splitoff point are $75,000. 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) $26,471
C) $17,647
D) $28,125
E) $60,000
34) Product X is sold for $8 a unit and Product Y is sold for $12 a unit. Each product can also be sold at
the splitoff point. Product X can be sold for $5 and Product Y for $4. Joint costs for the two products
totaled $4,000 for January for 600 units of X and 500 units of Y. What are the respective joint costs
assigned each unit of products X and Y if the sales value at splitoff method is used?
A) $2.96 and $4.44
B) $4.00 and $4.55
C) $4.00 and $3.20
D) $4.55 and $4.55
E) $3.20 and $4.00
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
Answer the following question(s) using the information below.
The Oxnard Corporation processes a liquid component up to the splitoff point where two products, Mr.
DirtOut and Mr. SinkClean, are produced and sold. There was no beginning inventory. The following
material was collected for the month of January:
Production:
Mr. DirtOut
147,500 litres
Mr. SinkClean
95,000 litres
Sales:
Mr. DirtOut
140,500 at $110 per litre
Mr. SinkClean
91,000 at $100 per litre
The cost of purchasing 250,000 litres of direct materials and processing it up to the splitoff point to yield a
total of 242,500 litres of good product was $380,000.
35) What are the physical-volume proportions to allocate joint costs for Mr. DirtOut and Mr. SinkClean,
respectively?
A) 59.00% and 41.00%
B) 60.82% and 39.18%
C) 39.18% and 60.82%
D) 59.79% and 40.21%
E) 41.00% and 59.00%
36) When using a physical-volume measure, what is the approximate amount of joint costs that will be
allocated to Mr. DirtOut and Mr. SinkClean?
A) $231,116 and $148,884
B) $224,200 and $155,800
C) $227,202 and $152,798
D) $155,800 and $224,200
E) $148,884 and $231,116
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
37) When using the physical-volume method, what is Mr. DirtOut’s approximate production cost per
unit?
A) $1.52
B) $1.54
C) $1.57
D) $1.61
E) $1.01
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
Answer the following question(s) using the information below:
The Morton 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:
Production:
condensed goat milk
26,100 litres
skim goat milk
32,400 litres
Sales:
condensed goat milk
$3.50 per litre
skim goat milk
$2.50 per litre
The costs of purchasing the 65,000 litres of unprocessed goat milk and processing it up to the splitoff
point to yield a total of 58,500 litres of salable product was $72,240. There were no inventory balances of
either product.
Condensed goat milk may be processed further to yield 19,500 litres (the remainder is shrinkage) of a
medicinal milk product, Xyla, for an additional processing cost of $3 per usable litre. Xyla can be sold for
$18 per litre.
Skim goat milk can be processed further to yield 28,100 litres of skim goat ice cream, for an additional
processing cost per usable litre of $2.50. The product can be sold for $9 per litre.
There are no beginning and ending inventory balances.
38) Using the sales value at splitoff method, what is the gross-margin percentage for condensed goat milk
at the splitoff point?
A) 21.1%
B) 55.1%
C) 58.1%
D) 38.2%
E) 41.9%
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
39) Using the sales value at splitoff method, what is the gross-margin percentage for skim goat milk at the
splitoff point?
A) 21.1%
B) 55.1%
C) 58.1%
D) 38.2%
E) 41.9%
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
40) Using the sales value at split off method, the percentage weightings for joint cost allocations for Jarlon
and Kharton respectively are:
A) 27.62% and 72.38%
B) 80.00% and 20.00%
C) 39.58% and 60.42%
D) 72.38% and 27.62%
E) 60.42% and 39.58%
41) Using the physical measures method, the weightings for joint cost allocations for Jarlon and Kharton
respectively are:
A) 27.62% and 72.38%
B) 80.00% and 20.00%
C) 39.58% and 60.42%
D) 72.38% and 27.62%
E) 60.42% and 39.58%
42) Using the sales value at split off method, the joint costs allocated to Jarlon would be:
A) $289,520
B) $115,808
C) $405,328
D) $110,480
E) $154,672
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
43) Using the sales value at split off method, the joint costs allocated to Kharton would be:
A) $289,520
B) $115,808
C) $110,480
D) $154,672
E) $405,328
44) Using the physical measures method, the joint costs allocated to Jarlon would be:
A) $320,000
B) $112,000
C) $405,328
D) $448,000
E) $289,520
45) Using the physical measures method, the joint costs allocated to Kharton would be:
A) $320,000
B) $112,000
C) $154,672
D) $448,000
E) $110,480
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
46) Assuming Cranbrook uses the sales value at split off method and 2,000 containers of Jarlon and 75
containers of Kharton are unsold at the end of the period, Cranbrook would report ending inventory of:
A) $38,272
B) $56,598
C) $53,560
D) $79,240
E) $58,100
47) Assuming Cranbrook uses the physical measures method and 2,000 containers of Jarlon and 75
containers of Kharton are unsold at the end of the period, Cranbrook would report cost of goods sold of:
A) $58,100
B) $506,400
C) $358,500
D) $143,400
E) $501,900
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
48) Sweet Sugar Company processes sugar beets into three products. During April the joint costs of
processing were $240,000. Production and sales value information for the month were as follows:
Sales Value at
Units Split off Separable
Product Produced Sales Value Costs
Sugar 12,000 $80,000 $24,000
Sugar syrup 8,000 $70,000 $64,000
Fructose syrup 4,000 $50,000 $32,000
Required:
Determine the amount of joint cost allocated to each product if the sales value at split off method is used.
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
49) BC Lumber processes timber into four products. During January the joint costs of processing were
$280,000. There was no beginning inventory at the beginning of the month. Production and sales value
information for the month were as follows:
Sales Value at
Product Boardmetres Split off Point Ending Inventory
2 × 4’s 6,000,000 $0.30 per boardmetre 500,000 boardmetre
2 × 6’s 3,000,000 0.40 per boardmetre 250,000 boardmetre
4 × 4’s 2,000,000 0.45 per boardmetre 100,000 boardmetre
slabs 1,000,000 0.10 per boardmetre 50,000 boardmetre
Required:
Determine the value of ending inventory if the sales value at split off method is used for product costing.
Round to 3 decimal places when necessary.
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
50) CSI Chemical, Inc. processes pine rosin into three products; turpentine, paint thinner, and spot
remover. During May the joint costs of processing were $240,000. Production and sales value information
for the month were as follows:
Product Units Produced Sales Value at Split off Point
Turpentine 3,000 litres $30,000
Paint thinner 3,000 litres 25,000
Wood alcohol 1,500 litres 12,500
Required:
Determine the amount of joint cost allocated to each product if the physical measure method is used.
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
51) Peachland Fruit Ltd. harvests blueberries. After harvest, the company sells some berries fresh, freezes
others and processes some into juice. During the summer the joint costs of processing the berry products
were $620,000. Any separable costs for each product are negligible and are not traced. There was no
beginning or ending inventories for the summer. Production and sales value information for the summer
were as follows:
Sales Value at
Product Units Split off Point
Juice 200,000 litres $6 per litre
Fresh 300,000 kilograms $8 per kilogram
Frozen 400,000 kilograms $5 per kilogram
Required:
Determine the amount allocated to each product if the sales value at split off method is used and compute
the cost per case for each product.
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
52) BC Lumber processes timber into four products. During January the joint costs of processing were
$280,000. There was no beginning inventory at the beginning of the month. Production and sales value
information for the month were as follows:
Sales Value at
Product Boardmetres Split off Point Ending Inventory
2 × 4’s 6,000,000 $0.30 per boardmetre 500,000 boardmetre
2 × 6’s 3,000,000 0.40 per boardmetre 250,000 boardmetre
4 × 4’s 2,000,000 0.45 per boardmetre 100,000 boardmetre
slabs 1,000,000 0.10 per boardmetre 50,000 boardmetre
Required:
Determine the value of ending inventory if the physical measures method is used for product costing.
Round to 3 decimal places when necessary.
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
53) CSI Chemical, Inc. processes pine rosin into three products; turpentine, paint thinner, and spot
remover. During May the joint costs of processing were $240,000. Production and sales value information
for the month were as follows:
Product Units Produced Sales Value at Split off Point
Turpentine 3,000 litres $30,000
Paint thinner 3,000 litres 25,000
Wood alcohol 1,500 litres 12,500
Required:
Determine the amount of joint cost allocated to each product if the sales value at split off method is used.
54) List the reasons that the sales value at splitoff method of joint cost allocation should be used.
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
55) Wharf Fisheries processes many of its seafood items to the demands of its largest customers, most of
which are large retail distributors. To keep the accounting system simple it has always assigned cost by
the weight of the finished product. However, with increased competition it has had to watch its prices
closely and in recent years several items have incurred zero profit margins. After several weeks of
investigation, your consulting firm has found that while weight is important in processing of seafood,
numerous items have very distinct processing steps and some items are processed through more steps
than others.
Required:
Based on the findings of your consulting firm, what changes might you recommend to the company in
the way of cost allocation among its products?
56) Paragon University operates an extensive and an expensive registration, testing, and counselling
centre, through which all students are required to pass through when they enter the university. The
registration effort’s costs (for the most part) are almost impossible to allocate based upon which students
require time, effort, etc. The cost of this centre is approximately 15% of the total costs of Paragon. This
department engages in no other activities than the registration of students. Paragon is interested in
determining the profitability of the three technical departments it operates. Paragon has the perception
that some departments are more profitable than others, and it would like to determine an appropriate
method of allocating the costs of this registration centre.
Required:
Recommend to Paragon University a method (or methods) of allocating the costs of registration to
the three departments.
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
15.3 Evaluate two different market-based cost allocation methods to identify which is
most appropriate to decide whether to sell at splitoff or process further.
1) The method of allocating joint product costs is an important guide for other management decisions.
2) The estimated net realizable value method allocates joint costs on the basis of the expected final sales
value in the ordinary course of business, less the expected separable costs of production and marketing of
the total production for the period.
3) The net realizable value method can be used for products for which there may not be any market price
available at split off.
4) Net realizable value generally means expected sales value plus expected separable costs.
5) A company can alter its total gross margin through its selection of joint cost allocation methods.
6) 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.
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
7) 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.
8) A criticism of the practice of carrying inventories at estimated net realizable values is that this practice
recognizes income before sales are made.
9) 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.
10) The decision of whether to process products beyond the split off process should be based on which of
the following?
A) revenue analysis
B) relevant cost analysis
C) production cost analysis
D) gross margin analysis
E) incremental operating income attainable beyond the split off point
11) The estimated net realizable method allocates joint costs on the basis of
A) expected final sales value less separable costs of production and marketing.
B) value added after the split off point.
C) sales value less value added after the split off point.
D) revenue less all direct manufacturing costs after split off point.
E) relative numbers of physical units of each product.
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
Use the information below to answer the following question(s).
Beverage Drink Company processes direct materials up to the split off point, where two products, A and
B, are obtained. The following information was collected for the month of July:
Direct materials processed: 2,500 litres (with 20 percent shrinkage)
Production:
A
1,500 litres
B
500 litres
Sales:
A
$15.00 per litre
B
$10.00 per litre
Cost of purchasing 2,500 litres of direct materials and processing it up to the split off point to yield a total
of 2,000 litres of good products was $4,500. There were no inventory balances of A and B.
Product A may be processed further to yield 1,375 litres of Product Z5 for an additional processing cost of
$150. Product Z5 is sold for $25.00 per litre. There was no beginning inventory and ending inventory was
125 litres.
Product B may be processed further to yield 375 litres of Product W3 for an additional processing cost of
$275. Product W3 is sold for $30.00 per litre. There was no beginning inventory and ending inventory was
25 litres.
12) What are the expected final sales values of production if Product Z5 and Product W3 are produced?
A) $11,250 and $34,375
B) $22,500 and $5,000
C) $31,250 and $10,500
D) $34,375 and $10,500
E) $34,375 and $11,250
13) What is Product Z5′s estimated net realizable value?
A) $11,100
B) $22,350
C) $34,225
D) $34,375
E) $34,525
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
14) What is Product Z5′s and Product W3’s respective production cost per unit, assuming the company
allocates joint costs on the basis of net realizable value?
A) $2.05 and $3.88
B) $2.50 and $2.88
C) $2.60 and $2.88
D) $2.60 and $3.61
E) $2.86 and $3.68
15) Which of the following methods allocates joint costs according to the appraised final sales value in the
ordinary course of business less the appraised separable costs of production and marketing?
A) constant gross-margin percentage NRV method
B) estimated net-realizable method
C) physical measure method
D) sales value at split off method
E) split off appraisal method
16) Which of the following methods calculates expected profits before any costs are allocated?
A) sales value at split off method
B) physical measure method
C) expected profits method
D) estimated net-realizable method
E) constant gross margin percentage NRV method
Cost Accounting: A Managerial Emphasis, 6e
Chapter 15 – Cost Allocation: Joint Products and Byproducts
17) All of the following statements about the constant gross margin percentage net-realizable method are
true EXCEPT
A) all products have equal gross margin percentages.
B) it is based on a tenuous underlying assumption.
C) the gross margin percentage remains the same regardless of the different amounts of separable costs.
D) the gross margin is calculated by deducting all separable costs from revenue.
E) some products may receive negative allocations of joint costs.
18) Which of the following statements is true concerning the practice of carrying inventories at NRV?
A) It is an inevitable result of joint cost allocation.
B) It results for the NRV method of joint cost allocation.
C) It results from the constant gross margin NRV method.
D) It is a widely-accepted practice.
E) It results in income recognition before sales are made.