Chapter 16 - Cost Allocation: Joint Products and Byproducts Flashcards Preview

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Flashcards in Chapter 16 - Cost Allocation: Joint Products and Byproducts Deck (36):
1

Which of the following statements best define split off 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.

c) It is the juncture in a joint production process when two or more products become separately identifiable.

2

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 byproducts 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 total sales values of other products, those products are called joint products.

d) When a joint production process yields two or more products with high total sales values relative to the total sales value of other products, those products are called joint products.

3

The products of a joint production process that have low total sales value compared with the total sales value of the main product are called __________.
a) primary products
b) joint products
c) byproducts
d) waste products

c) byproducts

4

__________ 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 split off point

c) Percentage of total sales value

5

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 governmental regulation
c) main product becomes technologically obsolete
d) byproduct loses its market due to a new invention

c) main product becomes technologically obsolete

6

Products with a relatively low sales value are known as _________.
a) primary products
b) main products
c) joint products
d) byproducts

d) byproducts

7

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.

c) Product classifications may change over time.

8

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) added to joint production costs and allocated to joint or main products

9

True or False: Joint costs are incurred beyond the split off point and are assignable to individual products.

FALSE

Joint costs are incurred prior to the split off point.

10

True or False: Joint costing allocates the joint costs to the individual products that are eventually sold.

TRUE

11

True or False: Separable costs include manufacturing costs only.

FALSE

Separable costs include manufacturing, marketing, distribution, and other costs.

12

True or False: Classification of main products, joint products, and byproducts can always be done with ease.

FALSE

In practice, distinctions among main products, joint products, and byproducts are not so clearcut.

13

True or False: Joint costs are the costs of a production process that yields multiple products simultaneously.

TRUE

14

True or False: The juncture in a joint production process when two products become separable is the byproduct point.

FALSE

The juncture in a joint production process when two products become separable is the split off point.

15

True or False: Before the split off point, decisions relating to the sale or further processing of each identifiable product cannot be made independently of decisions about the other products.

TRUE

16

True or False: When a joint production process yields two or more products with high total sales values, these products are called joint products.

TRUE

17

True or False: All products yielded from joint product processing have some positive value to the firm.

FALSE

Not all products yielded from the joint production process have some positive value to the firm.

18

True or False: If the value of a byproduct drops significantly, it could also be viewed as a joint product.

FALSE

If the value of a byproduct drops significantly, it will remain as a byproduct only.

19

What is a main product? Give an example.

When one product has a high total sales value compared with total sales value of other products of the process. (Ex. timber processed into lumber)

20

What is a joint product? Give an example.

When a joint production process yields tow or more products with high total sales value compared with the total sales value of other products. (Ex. crude oil processed into gasoline or kerosene)

21

What is a byproduct? Give an example.

Products of a joint production process that have low total sales value compared with the total sales value of the main product or joint products. (Ex. wood chips created when timber is processed into lumber)

22

What are joint costs?

Joint costs are the costs of a single production process that yield multiple products simultaneously.

23

What are separable costs?

Separable costs are all costs incurred beyond the split off point that are assignable to each of the specific products identified at the split off point.

24

What is the split off point?

The split off point is the juncture in a joint production process when the products become separately identifiable. An example is the point at which coal become coke, natural gas, and other products.

25

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

a) rate regulation requirements

26

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 may need the 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

a) the manufacturer may allocate a large portion of its other cots to these products

27

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 split off point method uses sales value of the entire production of the accounting period to allocate costs.

d) Sales value at split off method uses the sales value of the entire production of the accounting period to allocate costs.

28

An example of allocating joint costs using physical measures is allocating joint costs based on __________.
a) sales value at split off point
b) volume of the products
c) constant gross-margin percentage
d) net realizable value

b) volume of the products

29

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

d) net realizable value

30

The sales value at split off method _________.
a) allocates joint costs to joint products on the basis of the relative total sales value at the split off point.
b) allocates joint costs to joint products on the basis of a comparable physical measure at the split off 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) allocates joint costs to join products on the basis of the relative total sales value at the split off point.

31

Which of the following statements is true of 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 split off method always results in the same gross-margin percentage for all products
c) The sales value at split off 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.

c) The sales value at split off method allocates joint costs to each product in proportion to the sales value of total production.

32

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 split off point.
c) allocates joint costs to joint products on the basis of the relative sales value at the split off point.
d) allocates joint costs to joint products on the basis of relative NRV.

b) allocates joint costs to joint products on the basis of a comparable physical measure at the split off point.

33

The net realizable value method __________.
a) allocates joint costs to joint products on the basis of a comparable physical measure at the split off point.
b) allocates joint costs to joint products on the basis of the relative sales value at the split off 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) allocates joint costs to joint products on the basis of relative NRV

34

Which of the following statements is true in regard to the cause-and-effect relationship between allocated and joint costs and individual products?
a) A high individual product value results in a high level of joint costs.
b) A low individual product vale 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) There is no cause-and-effect relationship.

35

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.
d) revenues always remain consistent over short-run.

c) revenues are usually the best indicators of the benefits received.

36

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) joint cost