Question :
SHORT ANSWER.
Write the word or phrase that best completes each : 1196110
SHORT ANSWER.
Write the word or phrase that best completes each statement or answers the question. 71)
Identify each item on the following list as a joint cost or a separable cost.
a.Cost of processing crude oil in a gasoline refinery.
b.Cost of processing timber (trees) at a sawmill.
c.Cost of processing lumber into different lengths and sizes at a sawmill.
d.Cost of raw tomato processing, tomatoes are to be used for different soups in a soup plant.
e.Cost of canning soup in a soup plant.
f.Cost of moulding plastic for use in making different toys on an assembly line.
g Cost of refining gasoline for use in automobiles.
h.Cost of processing water for human consumption.
i.Cost of processing pulp into paper.
j.Cost of processing pulp into cardboard. 71)
_____________
72)
In each of the following industries, identify possible joint (or severable) products at the splitoff point.
a.Coal
b.Petroleum
c.Dairy
d.Lamb
e.Lumber
f.Cocoa Beans
g.Christmas Trees
h.Salt
i.Cowhide 72)
_____________
73)
For each of the following items tell whether it is a main product, joint product, byproduct, or scrap. Assume traditional situations.
a.Bones from a butcher shop
b.Sawdust from a sawmill
c.Sawdust from a furniture manufacturer
d.Fuel oil from petroleum processing
e.Salt from a salt works process
f. Broth from cooking food
g.Raw milk for dairy processing
h.Skim milk from dairy processing 73)
_____________
74)
List three reasons why we allocate joint costs to individual products or services. Give an example of when
the particular cost allocation reason would come into use.
74)
_____________
75)
Sweet Sugar Company processes sugar beets into three products. During April the joint costs of processing were $240,000. Production and sales value information for the month were as follows:
Sales Value at
UnitsSplit off Separable
Product Produced Point Costs
Sugar12,00080,00024,000
Sugar syrup8,00070,00064,000
Fructose syrup4,00050,00032,000
Required:
Determine the amount of joint cost allocated to each product if the sales value at split off method is used. 75)
_____________
76)
The Regina Foundry Corporation makes miniature Mountie statues from cast iron. Sales total 40,000 units
a year. The statutes are finished either rough or polished, with an average demand of 60% rough and
40% polished. Iron ingots, the direct material, costs $6 per pound. Processing costs are $200 to
convert 20 pounds into 40 statutes. Rough statutes are sold for $15 each, and polished statutes can be sold
for $18 or engraved for an additional cost of $5. Polished statues can then be sold for $30.
Required:
Determine whether The Regina Foundry Corporation should sell the engraved statutes. Why?
76)
_____________
77)
BC Lumber processes timber into four products. During January the joint costs of processing were $280,000. There was no beginning inventory at the beginning of the month. Production and sales value information for the month were as follows:
Sales Value at
Product Boardmetres Split off Point Ending Inventory
2 x 4’s6,000,000$0.30 per boardmetre500,000 bdmetre
2 x 6’s3,000,0000.40 per boardmetre250,000 bdmetre
4 x 4’s2,000,0000.45 per boardmetre100,000 bdmetre
slabs1,000,0000.10 per boardmetre
50,000 bdmetre
Required:
Determine the value of ending inventory if the sales value at split off method is used for product costing. Round to 3 decimal places when necessary. 77)
_____________
78)
CSI Chemical, Inc. processes pine rosin into three products; turpentine, paint thinner, and spot remover. During May the joint costs of processing were $240,000. Production and sales value information for the month were as follows:
Product Units Produced Sales Value at Split off Point
Turpentine3,000 litres$30,000
Paint thinner3,000 litres25,000
Wood alcohol1,500 litres12,500
Required:
Determine the amount of joint cost allocated to each product if the physical measure 78)
_____________
79)
Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned tomatoes. During the summer the joint costs of processing the tomatoes were $420,000. There was no beginning or ending inventories for the summer. Production and sales value information for the summer were as follows:
Sales Value at
Product Cases Split off Point Separable Costs Selling Price
Catsup100,000$6 per case $3.00 per case $28 per case
Juice150,0008 per case5.00 per case25 per case
Canned200,0005 per case2.50 per case10 per case
Required:
Determine the amount allocated to each product if the estimated net realizable value method is used and compute the cost per case for each product. 79)
_____________
80)
AllCanada Wire Products processes copper into wire. It makes 12 gauge and 14 gauge wire. During April the joint costs of processing the aluminium were $365,000. There were no beginning or ending inventories for the month. Production and sales value information for the month were as follows:
Product Feet Separable Costs Selling Price
14 gauge200,000$0.20 per metre $0.90 per metre
16 gauge600,0000.30 per metre1.00 per metre
Required:
Determine the amount of joint costs allocated to each product if the constant gross-margin percentage method is used. 80)
_____________
71)
a. joint costf.
joint cost
b. joint costg. separable cost
c. separable costh. separable cost
d. joint costi. separable cost
e. separablej. separable cost 72)
a.Coke, Gas, Benzole, Tar, Ammonia
b.Crude Oil, Gas, Raw LPG
c.Milk, Butter, Cheese, Ice Cream, Skim Milk
d.Lamb Cuts, Tripe, Hides, Bones, Fat
e.Board, Newsprint, Shavings, Chips, etc.
f.Cocoa Butter, Cocoa Powder, Cocoa Shells
g.Christmas Trees, Wreaths, Decorations
h.Hydrogen, Chlorine, Caustic Soda
i.Leather, Suede, Chew Toys
73)
a.scrap
b.byproduct
c.scrap
d.joint product
e.main product
f.byproduct
g.joint product
h.joint product 74)
a.For inventory costing, and cost of goods sold computations for financial accounting purposes.
Example: Cost of goods sold and ending inventory valuation is necessary for reports to shareholders and for the inland revenue service.
b.For internal costing and cost of goods sold computations for internal reporting purposes.
Example: These computations are necessary for division profitability analysis.
c.Reimbursement under contracts.
Example: A firm produces multiple products or services—and uses the same resources and facilities to produce the products or services. But not all the firm’s products are under the contract. The firm must allocate the cost of these shared facilities or resources to reflect the portion used by the product under the contract.
d.Insurance settlement computations.
Example: Where a business with multiple products or services claim losses under an insurance policy and wants to calculate the loss. The insurance company and the insured must agree on the value of the loss.
e.Rate regulation. When companies are subject to rate regulation, the allocation of joint costs can be a significant factor in determining the regulated rates.
Example: Crude oil and natural gas are produced out of a common well.
75)
Product Units Sales Value Percent
Joint cost allocated
Sugar12,000$ 80,00040% x $240,000$ 96,000
Sugar syrup8,00070,00035 x 240,0004,000
Fructose syrup4,00050,00025 x 240,00060,000
Total$200,000100%$240,000 76)
The Regina Foundry Corporation
should engrave the statutes because they increase profits by $7
per statute.
RoughPolished
Sales$15.00$18.00
Cost of Sales:
Materials ($6 x 20)/40
Conversion $200/40
$3.00
5.00
8.00
$3.00
5.00
8.00
Operating Income (loss)$7.00$10.00
Sales, polished and engraved$30.00
Costs:
Materials
Conversion
Additional Processing
$3.00
5.00
5.00
13.00
Advantage of processing further$17.00
77)
Product Boardmetres Sales value % Joint Cost Allocated
2 x 4’s6,000,000$1,800,00045.0% x 280,000=$126,000
2 x 6’s 3,000,0001,200,00030.0% x 280,000=84,000
4 x 4’s 2,000,000900,00022.5% x 280,000=63,000
slabs1,000,000100,0002.5%
x 280,000=7,000
Totals$4,000,000100.0%
$280,000
ProductFraction of prod. in inventory Allocated Inventory value
2 x 4’s500,000/6,000,000 x $126,000 =$10,500
2 x 6’s250,000/3,000,000 x 84,000 =7,000
4 x 4’s100,000/2,000,000 x 63,000 =3,150
slabs50,000/1,000,000 x 7,000 =
350
Total$21,000
78)
Product Units produced Percentage Joint costs Allocated
Turpentine3,000 litres40% x $240,000 = $ 96,000
Paint thinner 3,000 litres40 x 240,000 =
96,000
Spot remover 1,500 litres20 x 240,000 =
48,000
Totals7,500 litres100%$240,000 79)
Product Expected value Separable Net value Percentage
Catsup$2,800,000$ 300,000 $2,500,000 35.71%
Juice3,750,000750,000
3,000,000 42.86
Canned2,000,000500,000
1,500,000 21.43
Totals$7,000,000100.00%
Product Joint costs Allocated Separable Product costs
Catsup$420,000 = $149,982 + $300,000 = $449,982
Juice420,000
= 180,012 + 750,000 =
930,012
Canned420,000
= 90,006 + 500,000 =
590,006
Catsup cost per case = $449,982/100,000 = $4.50
Juice cost per case = $930,012/150,000 = $6.20
Canned cost per case = $590,006/200,000 = $2.95 80)
Expected sales:
14 gauge 200,000 x $0.90$180,000
16 gauge 600,000 x $1.00600,000
Total sales 780,000
Costs:
Joint$365,000
14 gauge (200,000 x $0.20) 40,000
16 gauge (600,000 x $0.30)
180,000
585,000
Gross margin$195,000
Gross-margin percentage $195,000/$780,000 = 0.25
14 gauge 16 gauge
Totals
Sales$180,000$600,000$780,000
Less gross margin (0.25)
45,000 150,000
195,000
Cost of goods sold$135,000$450,000$585,000
Separable costs
40,000
180,000
220,000
Joint costs allocated$ 95,000$270,000$365,000 81)
Paper Cardboard Totals
Sales$330,000$336,000$666,000
Produced but not sold
27,500
42,000
69,500
Total sales value$357,500$378,000$735,500
Separable costs
224,000
264,000
488,000
Contribution margin$133,500$114,000$247,500
Joint costs144,000
Gross margin$103,500 82)
Because of demand, make 24 per batch of rough (0.60 x 40). Because of higher profit margin, all polished statues should be engraved. The product mix should be 100 percent polished with engraving.
Rough Polished
Sales$15.00 $18.00
Cost of sales:
Materials ($6 x 20)/40$3.00
$ 3.00
Conversion $200/40
5.00
8.00
Operating income (loss)$ 7.00
$10.00
Sales polished and engraved$30.00
Costs:
Materials$3.00
Conversion5.00
Additional processing5.00
13.00
Incremental income of processing further
$17.00 83)
