Chapter 16 Cost Accounting Cost Allocation: Joint Products and Byprod

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1. What type of cost is the result of an event that results B) joint cost
in more than one product or service simultaneously?
A) byproduct cost
B) joint cost
C) main cost
D) separable cost

2. Which of the following statements best define splitoff C) It is the juncture

point in joint costing? in a joint produc-
A) It is the point at which managers decide to discon- tion process when
tinue one or more of the products. two or more prod-
B) It is the point at which the managers decide to ucts become sep-
outsource some of its production processes. arately indentifi-
C) It is the juncture in a joint production process when able
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.

3. Which of the following statements is true of joint pro- B) Decisions re-

duction process and its components? lating to the sale
A) Distribution costs incurred beyond the splitoff or further process-
point assignable to each of the specific products iden- ing of each identi-
tified at the splitoff point are considered as joint costs. fiable product can
B) Decisions relating to the sale or further processing be made indepen-
of each identifiable product can be made indepen- dently of decisions
dently of decisions about the other products beyond about the other
the splitoff point. products beyond
C) When a joint production process yields two or more the splitoff point
products with low total sales values relative to the
total sales values of other products, those products
are called joint products.
D) The primary purpose of joint costing is to allocate
the separable costs to the individual products that are
eventually sold.

4. The focus of joint costing is on allocating costs to C) at the splitoff

individual products ________. point
A) before the splitoff point
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B) after the splitoff point
C) at the splitoff point
D) at the end of production

5. Which of the following statements is true of joint cost- A) The costs

ing? of a produc-
A) The costs of a production process that yields mul- tion process that
tiple products simultaneously are called joint costs. yields multiple
B) Distribution costs incurred beyond the splitoff products simulta-
point that are assignable to each of the specific prod- neously are called
ucts identified at the splitoff point are considered as joint costs
joint costs.
C) The primary purpose of joint costing is to allocate
the separable costs to the individual products that are
eventually sold.
D) Joint costing is less useful for companies which
manufacture multiple products simultaneously from
the same production process.

6. When a single manufacturing process yields two C) main products

products, one of which has a relatively high sales and byproducts
value compared to the other, the two products are
respectively known as ________.
A) joint products and byproducts
B) joint products and scrap
C) main products and byproducts
D) main products and joint products

7. Which of the following statements best define joint D) When a

products? joint production
A) When one product has a high total sales value process yielfs two
compared with the total sales value of other products or more products
of the process, that product is called a joint product. with high total
B) Product of a joint production process that have the sales values rel-
same sales value compared with the total sales value ative to the to-
of the by products is called a joint product. tal sales values
C) When one product has a low total sales value com- of other products
pared with the total sales value of other products of those products are
the process, that product is called a joint product.
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 Chapter 16 Cost Accounting Cost Allocation: Joint Products and Byprod
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D) When a joint production process yields two or more called joint prod-
products with high total sales values relative to the ucts/
total sales values of other products, those products
are called joint products.

8. The products of a joint production process that have C) byproducts

low total sales values compared with the total sales
value of the main product are called ________.
A) primary products
B) joint products
C) byproducts
D) waste products

9. ________ is the differentiating factor while classifying C) Percentage of

a product as a main product or byproduct. total sales value
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 splitoff point

10. In joint costing, which of the following changes may C) main product
lead to a change in product classification? becomes techno-
A) main product sales price increases due to a new logically obsolete
application
B) byproduct sales price decreases due to a new gov-
ernment regulation
C) main product becomes technologically obsolete
D) byproduct loses its market due to a new invention

11. Products with a relatively low sales value are known D) byproducts
as ________.
A) primary products
B) main products
C) joint products
D) byproducts

12. Which of the following statements is true of main C) Product clas-

products and byproducts? sifications may
A) A byproduct will never become a main product. change over time
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B) A main product will never become a byproduct.
C) Product classifications may change over time.
D) Product classifications remains constant over time

13. Outputs with a negative sales value are ________. B) added to joint
A) added to cost of goods sold production costs
B) added to joint production costs and allocated to and allocated to
joint or main products joint or main prod-
C) added to joint production costs and allocated to ucts
byproducts and scrap
D) subtracted from product revenue

14. Which of the following is a possible reason to allocate A) rate regulation

joint costs to individual products? requlation require-
A) rate regulation requirements ments
B) to prepare financial statements
C) for product design decisions
D) to determine tax rates

15. A business which enters into a contract to purchase a A) the manufac-

product which compensates the manufacturer under turer may allocate
a cost reimbursement agreement should take an ac- a large portion of
tive part in the determination of how joint costs are its other costs to
allocated because ________. these products
A) the manufacturer may allocate a large portion of its
other costs to these products
B) the business need those 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

16. Which of the following statements is true of the meth- D) Sales value
ods for allocating joint costs? at splitoff method
A) Constant gross-margin percentage method results uses the sales val-
in same joint production cost per unit for all products. ue of the entire
B) Estimated net realizable value method results in production of the
same gross margin percentage for all products. accounting period
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C) Present value allocation method is the least pre- to the allocated
ferred method due to its complex calculations. costs
D) Sales value at splitoff method uses the sales value
of the entire production of the accounting period to
allocate costs.

17. An example of allocating joint costs using physical B) volume of the

measures is allocating joint costs based on ________. products
A) sales value at splitoff point
B) volume of the products
C) constant gross-margin percentage
D) net realizable value

18. In joint costing, which of the following is a mar- D) net realizable

ket-based approach to allocating costs? value
A) sales units
B) units of production
C) physical measures
D) net realizable value

19. The sales value at splitoff method ________. A) allocates joint

A) allocates joint costs to joint products on the basis costs to joint prod-
of the relative total sales value at the splitoff point ucts on the basis
B) allocates joint costs to joint products on the basis of the relative total
of a comparable physical measure at the splitoff point sales value at the
C) allocates joint costs to joint products on the basis splitoff point
of relative NRV
D) allocates joint costs to joint products in a way that
each product has an identical gross-margin percent-
age

20. Which of the following statements is true of the meth- C) The sales val-
ods for allocating joint costs? ue at splitoff
A) The net realizable value method uses the sales method allocates
value of the units sold during the accounting period joint costs to each
to allocate joint costs. product in propor-
B) The sales value at splitoff method always results in tion to the sales
the same gross-margin percentage for all products. value of total pro-
C) The sales value at splitoff method allocates joint duction
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 Chapter 16 Cost Accounting Cost Allocation: Joint Products and Byprod
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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.

21. The physical-measure method ________. B) allocates joint

A) allocates joint costs to joint products in a way that costs to joint prod-
each product has an identical gross-margin percent- ucts on the ba-
age sis of a compat-
B) allocates joint costs to joint products on the basis able physical mea-
of a comparable physical measure at the splitoff point sure at the splitoff
C) allocates joint costs to joint products on the basis point
of the relative sales value at the splitoff point
D) allocates joint costs to joint products on the basis
of relative NRV

22. The net realizable value method ________. D) allocates joint

A) allocates joint costs to joint products on the basis costs to joint prod-
of a comparable physical measure at the splitoff point ucts on the basis
B) allocates joint costs to joint products on the basis of relative NRV
of the relative sales value at the splitoff point
C) allocates joint costs to joint products in a way that
each product has an identical gross-margin percent-
age
D) allocates joint costs to joint products on the basis
of relative NRV

23. Which of the following statements is true in regard to D) There is no

the cause-and-effect relationship between allocated cause-and-effect
joint costs and individual products?
A) A high individual product value results in a high
level of joint costs.
B) A low individual product value 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.

24.
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 Chapter 16 Cost Accounting Cost Allocation: Joint Products and Byprod
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The benefits-received criteria for allocating joint costs C) revenues are
indicate market-based measures are preferred be- usually the best
cause ________. indicators of the
A) physical measures such as quantity are clear bases benefits recieved
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

25. A reason why a physical-measure to allocate joint B) physical volume

costs is less preferred than the sales value at splitoff usually has little
is because ________. relationship to the
A) a physical measure such as volume is difficult to revenue producing
estimate than sales value power of products
B) physical volume usually has little relationship to
the revenue producing power of products
C) a physical measure usually results in less costs
being allocated to the product that weighs the most
D) customers will easily understand that the products
are overpriced

26. Which of the following is true of the physical-measure A) Costs cannot

approach of allocating joint costs? be allocated if the
A) Costs cannot be allocated if the measurement ba- measurement ba-
sis for each product are different. sis for each prod-
B) Physical measures usually result in less costs be- uct are different
ing allocated to the product that weighs the most.
C) The physical measure reflects a product's ability to
generate revenues.
D) Obtaining comparable physical measures for all
products is always straightforward.

27. Which of the methods of allocating joint costs usually C) sales value at
is considered the simplest to implement? splitoff
A) estimated net realizable value
B) constant gross-margin percentage NRV
C) sales value at splitoff
D) physical measures
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28. Which of the following statements is true of the meth- D) The sales value
ods for allocating joint costs? at splitoff method
A) Under the cause-and-effect criterion, the physi- follows the bene-
cal-measure method is highly desirable. fits-recieved crite-
B) Byproducts are never excluded from the denomina- rion of cost alloca-
tor used in the physical-measure method. tion
C) The NRV method is never used when the selling
prices of joint products vary frequently.
D) The sales value at splitoff method follows the ben-
efits-received criterion of cost allocation.

29. Why do accountants criticize the practice of carrying C) In effect,

inventories at estimated net realizable values? this practice rec-
A) The costs of producing the products are usually ognizes income
estimates. before sales are
B) There is usually no clearly defined realizable value made
for any inventories.
C) In effect, this practice recognizes income before
sales are made.
D) It will result in higher cost of goods sold and lesser
profits

30. The constant gross-margin percentage NRV method B) computes gross

of joint cost allocation ________. margin before allo-
A) involves allocating costs in such a way that main- cating the costs to
taining the same gross margin percentage for each the products
product that was obtained in prior years
B) computes gross margin before allocating the costs
to the products
C) is the same as the estimated NRV method
D) is the same as the sales-value at splitoff method

31. In joint costing, the sales value at splitoff method is D) since the sell-
used frequently ________. ing-price data ex-
A) in a dynamic business environment where the sell- ists at the splitoff
ing prices change frequently
B) in anticipation of subsequent management deci-
sions
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C) when selling prices are dependent on further pro-
cessing decisions
D) since the selling-price data exists at the splitoff

32. When the selling prices of all products at the splitoff B) NRV method
point are unavailable, the ________ is the best alter-
native for allocating joint costs.
A) sales value at splitoff method
B) NRV method
C) physical measures method
D) constant gross-margin percentage method

33. Which of the following statements is true of the meth- C) The NRV
ods for allocating joint costs? method assumes
A) The sales value at splitoff method lacks a common that none of the
basis for allocating joint costs to products. markup is attribut-
B) The complexity of the sales value at splitoff method able to the separa-
increases when managers make frequent changes to ble costs
the sequence of post-splitoff processing decisions.
C) The NRV method assumes that none of the markup
is attributable to the separable costs.
D) The NRV method treats the joint products as though
they comprise a single product.

34. The drawback of the constant gross-margin percent- B) it assumes the

age NRV method in joint costing is that ________. profit margin to be
A) it recognizes that profits are derived from the costs identical across all
incurred after splitoff products
B) it assumes the profit margin to be identical across
all products
C) it attempts to approximate the sales values at
splitoff by subtracting from final selling prices the
separable costs incurred after the splitoff point
D) it ignores the separable costs of further processing

35. In joint costing, the ________ assumes that all the B) NRV method
markup is attributable to the joint process costs.
A) sales value at splitoff method
B) NRV method
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C) constant gross-margin percentage method
D) physical measures method

36. When a product is the result of a joint process, the D) extra operat-
decision to process the product past the splitoff point ing income earned
further should be influenced by the ________. past the splitoff
A) total amount of the joint costs point
B) portion of the joint costs allocated to the individual
products
C) extra revenue earned past the splitoff point
D) extra operating income earned past the splitoff
point

37. In joint costing, the potential conflict between cost B) physical mea-
concepts used for decision making and cost concepts sure
used for evaluating the performance of managers will
be most severe when the ________ method is used.
A) sales value at splitoff
B) physical measure
C) constant gross-margin percentage NRV
D) estimated NRV

38. Which of the following statements is true of D) Costs that differ

sell-or-process-further decisions in joint costing? between the alter-
A) Joint costs incurred before the splitoff point are natives of selling
relevant in deciding whether to process the product products or pro-
further. cessing further are
B) All separable costs in joint-cost allocations are relevant
incremental costs.
C) Separable costs incurred before the splitoff point
are irrelevant in deciding whether to process the prod-
uct further.
D) Costs that differ between the alternatives of selling
products or processing further are relevant.

39. What factor most often drives joint cost allocation? C) selling prices
A) performance evaluation
B) manager compensation

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C) selling prices
D) simplicity of the method

40. Which method of accounting recognizes byproducts C) production

in the financial statements at the time their production method
is completed?
A) gross margin method
B) sales method
C) production method
D) market value method

41. A negative consequence of recording byproducts in C) managers can

the accounting records when the sale occurs is that be tempted to
________. stockpile byprod-
A) the revenue from the byproducts is usually fairly ucts
large and the accounting records will be distorted
B) earnings cannot be timed under this method
C) managers can be tempted to stockpile byproducts
D) it involves complex calculations compared to the
production method

42. Which of the following statements is true of the pro- B) It is the

duction method of accounting for byproducts? preferred method
A) It makes no journal entries until the byproduct is because of the
sold. matching principle
B) It is the preferred method because of the matching
principle.
C) It records revenues of the byproduct in the income
statement as revenue.
D) It adds revenues of the byproduct to the cost of
goods sold in the income statement.

43. Which of the following journal entries can happen only C) Byproduct In-
under the production method of recording byprod- ventory
ucts? Finished Goods -
A) Work in Process Main product
Finished Goods - Byproduct
Accounts Payable
B) Cash or Accounts Receivable
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Revenues - Main product
C) Byproduct Inventory
Finished Goods - Main product
Work in Process
D) Cash or Accounts Receivable
Revenues - Byproduct

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