ADM 3346 Lecture Notes - Lecture 7: Earnings Before Interest And Taxes, Gross Margin, North Rhine-Westphalia

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12 Jan 2016

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Chapter 15 - cost allocation: joint products and byproducts. Q1: distinguish among different types of salable products, scraps and toxic waste. Costs of a single production process that yields multiple products simultaneously. The place, in a joint production process, where two or more products become separately identifiable: all costs incurred beyond the splitoff point that are assignable to one or more. Cost values may be used for evaluation purposes. Q2: how are joint costs allocated: methods of allocating joint costs. Can be used only when joint products are measured the same way (e. g. pounds or feet). Often used when all products sold at split-off: net realizable value (nrv) method. Nrv = final selling price separable costs. The two nrv methods can be used when some products are processed. Allocates joint costs on the basis of their relative proportions at the splitoff point: using a common physical measure such as weight or volume.

Related Questions

Joint Cost Allocation

Your firm pays for mineral rights at the Lego Mine, which contains diamonds, citrine, rubies, and emeralds, as well as large quantities of plain rock. Your firm uses the stones that are mined for the following products:

Diamond rings	2
Citrine bracelets	2
Ruby bracelets	2
Emerald rings	3
Bags of rock

A ring needs 4 stones.

A bracelet needs 10 stones.

Your firm has two kinds of employees: miners and jewelers. Miners go through the rocks in the mine, sort the diamonds, citrine, rubies, emeralds into individual transportation containers, and bag up the plain rock for sale landscapers. The transportation containers are then sent on to the jewelers, who make rings and bracelets.

Go through one production period, and keep track of times for the following:

Mining: 36 seconds

Making diamond rings: 12.5 seconds

Making citrine bracelets: 12.5 seconds

Making ruby bracelets: 12.5 seconds

Making emerald rings: 12.5 seconds

After all products are manufactured and ready for sale, complete the requirements below. Plain rock is treated as a byproduct. Plain rock are 20 stones. Calculate following costs were incurred this period:

Cost of mineral rights	$2000
Company overhead	$1500
Mining labor, paid at $5/second
Jeweler labor, paid at $10/second
Bracelet settings at $100/bracelet
Ring settings at $50/ring

Bags of rock sell for $100 at splitoff. The following are per-unit prices your firm charges for each jewelry product, as well as how much each individual stone could sell for (at splitoff):

	Per ring or bracelet	Per stone
Diamond	$1000	$400
Citrine	$500	$100
Ruby	$700	$175
Emerald	$800	$200

1. Calculate total joint costs, separable costs for each product, and NRV for each product

2. Calculate the allocated joint costs and the profitability of each product line under each of the following assumptions:

a. The byproduct is accounted for at the time of sale, and sales value at the splitoff point is the allocation base for joint costs

b. The byproduct is accounted for at the time of production, and NRV is the allocation base for joint cost

c. The byproduct is accounted for at the time of production, and number of stones is the allocation base for joint cost

3. Briefly, state which cost allocation base is the most appropriate for this company, and explain why.

chocolatecat187

1. A cost pool is :

A. a collection of homogeneous cost to be assigned.

B. almost always the combined result of decision made bydifferent responsibility center manager.

C. The primary function of a responsibility accountingsystem.

D. the amount of cost that has been allocated say, 10% to a userdepartment.

E. The tool used to allocate cost dollars to userdepartments.

2.Variable costs are those costs that:

A. vary (in total ) inversely with changes in activity.

B. vary (in totals) directly with in activity.

C. remain constant (in total) as activity changes.

D. Decrease on a per unit basis as activity increase.

E. Increase on a per unit basis as activity increases.

3. When comparing EOQ and JIT inventory system, which of thefollowing statement is false?

A. The EOQ approach takes the viewpoint that some inventory isnecessary.

B. The EOQ system assumes a constant order quantity.

C. JIT argues that inventory investments should beminimized.

D. The EOQ system focuse on acquistion and holding costs.

E. JIT argues that safety stocks are necessary to reduce theprobability of a stock shortage.

4. Procust costing in manufacturing firm is the process of:

A. Accumulating the company 's period costs

B. Allocating costs among the firm departments.

C. Placing a value on the company's fixed assets.

D. Assigning cost to the firm's inventory.

E. Assinging costs to the comapny's managers.

5.Decentralized firms can delegate authority by structuring anorganization into responsibility centers. Which of the followingorganizational segments is most like a totally independent,standalone business where managers are expected to "make it on theown?

A. Cost center

B. Revenue Center

C. Profit Center

D. Investment center

E. Contribution center

6. Costs that are expensed when incurred are called:

A. Product costs

B. Direct Costs

C. Inventoriable Cost

D. Period Cost

E. Indirect costs

7. A budget serves as a benchmark against which: