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 Estimated
Product Production Selling Price Separate Cost
Product A 3,000 $2,000 $200
Product B 2,400 $3,000 $500
Product C 1,200 $1,500 $100

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.