Cost Accounting Chapter 11 Quiz

1. A product that results from a joint process may be classified as a. a joint product. b. a by-product. c. scrap. d. All of the above. 2. Select the incorrect statement from the following. a. Producing first-quality merchandise and factory seconds in a single operation can be viewed as a joint process. b. Waste is a residual output from many production processes whose sales value is comparable to that of by-products. c. By-products are distinguished from scrap by their higher sales value. d. While joint cost allocations are necessary to determine financial statement valuations, such allocations should not be used in making internal decisions. 3. Select the incorrect statement concerning the split-off point. a. The split-off point is the point at which joint process outputs are first identifiable as individual products. b. If joint output is processed beyond the split-off point, additional costs will be incurred and must be assigned to the specific products for which those costs were incurred. c. A single joint process cannot have multiple spit-off points. d. Output may be sold at the split-off point or processed further and then sold. 4. In joint product costing and analysis, which one of the following costs is relevant when deciding the point at which a product should be sold in order to maximize profits? a. Purchase costs of the materials required for the joint products b. Separable costs after the split-off point c. Joint costs to the split-off point d. Sales salaries for the period when the units were produced 5. Before committing resources to a joint process, management must first decide whether total expected revenue from selling the joint output basket of products is likely to exceed the: a. selling expenses for the goods. b. joint costs and separate processing costs after split-off. c. disposal costs for any waste generated. d. All of the above. 6. When estimating unit selling prices for use in allocating joint production costs, which of the following should be considered? a. Competitor prices b. Consumers sensitivity to price changes c. Costs d. All of the above 7. All of the following are common monetary measures for allocating joint costs to joint products except: a. approximated net realizable value at split-off. b. gross margin at split-off. c. net realizable value at split-off. d. sales value at split-off.

8. LS Company manufactures two products, Product L and Product S in a joint process. The joint (common) costs incurred are $420,000 for a standard production run that generates 180,000 units of L and 120,000 units of S. Product L sells for $2.40 per unit while Product S sells for $3.90 per unit. Assuming both products are sold at the split-off point, the amount of joint cost of each production run allocated to Product L on a net realizable value (NRV) basis is: a. $252,000. b. $218,400. c. $201,600. d. $168,000. 9. Products A and B are manufactured in a joint process. The joint (common) costs incurred are $252,000 for a standard production run that generates 108,000 gallons of Product A which sells for $2.40 per gallon and 72,000 gallons of Product B which sells for $3.90 per gallon. If no additional costs are incurred after the split-off point, the amount of joint cost of each production run allocated to Product B on a physical measure basis is: a. $100,800. b. $140,000. c. $151,200. d. $280,800. 10. Products X and Y are manufactured in a joint process. The joint (common) costs incurred are $420,000 for a standard production run that generates 180,000 gallons of Product X which sells for $2.40 per gallon and 120,000 gallons of Product Y which sells for $3.90 per gallon. If additional processing costs beyond the split-off point are $1.40 per gallon for Product X and $0.90 per gallon for Product Y, the amount of joint cost allocated to Product Y on a net realizable value basis is: a. $280,000. b. $252,000. c. $168,000. d. $140,000. 11. M Company incurs $10,000,000 in joint costs for its three products. The company estimates the products production, final selling price, and separate costs after split -off as follows: Estimated Selling Price $2,000 $3,000 $1,500 Estimated Separate Cost $200 $500 $100

Product Product A Product B Product C

Production 3,000 2,400 1,200

How much of the joint costs should be allocated to Product A under the approximated net realizable value at split-off? (Note: round percentages to zero decimal places.) a. $4,600,000 b. $4,100,000 c. $1,300,000 d. None of the above

12. P Inc. always generates a certain amount of waste due to the nature of its production activities regardless of which products it is producing at the time. After production in a recent month, the company sold $200 of scrap. Which of the following is the correct entry to record the sale of the scrap using the realized value approach? a. Cash 200 Manufacturing Overhead 200 b. Cash 200 Finished Goods 200 c. Cash 200 Scrap Inventory 200 d. Cash 200 Work in Process 200 13. Select the incorrect statement concerning the accounting for by-product and scrap. a. Reducing joint cost by the NRV of the by-product/scrap is the traditional method used to account for such goods. b. Regardless of whether a company uses the NRV or the realized value approach, the specific method used to account for by-product should be established before the joint cost is allocated to the joint products. c. Two common methods used to account for by-products are the NRV approach and the realized value approach. d. Under the realized value approach, the estimated selling price of the by-product is recognized prior its actual sale. 14. Not-for-profit organizations may charge the entire cost of a joint activity to fund-raising if all of the following criteria are met except: a. amount. b. audience. c. content. d. purpose. 15. If a majority of compensation or fees for anyone performing a part of an activity is tied to contributions raised, the activity automatically fails the a. purpose criterion and all costs of the activity must be charged to program activities. b. content criterion and all costs of the activity must be charged to fund-raising. c. purpose criterion and all costs of the activity must be charged to fund-raising. d. audience criterion and all costs of the activity must be charged to administrative activities.