Question :
11) The estimated net realizable method allocates joint costs the : 1186052
11) The estimated net realizable method allocates joint costs on the basis of
A) expected final sales value less separable costs of production and marketing.
B) value added after the split off point.
C) sales value less value added after the split off point.
D) revenue less all direct manufacturing costs after split off point.
E) relative numbers of physical units of each product.
Use the information below to answer the following question(s).
Beverage Drink Company processes direct materials up to the split off point, where two products, A and B, are obtained. The following information was collected for the month of July:
Direct materials processed: 2,500 litres (with 20 percent shrinkage)
Production:
A
1,500 litres
B
500 litres
Sales:
A
$15.00 per litre
B
$10.00 per litre
Cost of purchasing 2,500 litres of direct materials and processing it up to the split off point to yield a total of 2,000 litres of good products was $4,500. There were no inventory balances of A and B.
Product A may be processed further to yield 1,375 litres of Product Z5 for an additional processing cost of $150. Product Z5 is sold for $25.00 per litre. There was no beginning inventory and ending inventory was 125 litres.
Product B may be processed further to yield 375 litres of Product W3 for an additional processing cost of $275. Product W3 is sold for $30.00 per litre. There was no beginning inventory and ending inventory was 25 litres.
12) What are the expected final sales values of production if Product Z5 and Product W3 are produced?
A) $11,250 and $34,375
B) $22,500 and $5,000
C) $31,250 and $10,500
D) $34,375 and $10,500
E) $34,375 and $11,250
13) What is Product Z5’s estimated net realizable value?
A) $11,100
B) $22,350
C) $34,225
D) $34,375
E) $34,525
14) What is Product Z5’s and Product W3’s respective production cost per unit, assuming the company allocates joint costs on the basis of net realizable value?
A) $2.05 and $3.88
B) $2.50 and $2.88
C) $2.60 and $2.88
D) $2.60 and $3.61
E) $2.86 and $3.68
15) Which of the following methods allocates joint costs according to the appraised final sales value in the ordinary course of business less the appraised separable costs of production and marketing?
A) constant gross-margin percentage NRV method
B) estimated net-realizable method
C) physical measure method
D) sales value at split off method
E) split off appraisal method
16) Which of the following methods calculates expected profits before any costs are allocated?
A) sales value at split off method
B) physical measure method
C) expected profits method
D) estimated net-realizable method
E) constant gross margin percentage NRV method
17) All of the following statements about the constant gross margin percentage net-realizable method are true EXCEPT
A) all products have equal gross margin percentages.
B) it is based on a tenuous underlying assumption.
C) the gross margin percentage remains the same regardless of the different amounts of separable costs.
D) the gross margin is calculated by deducting all separable costs from revenue.
E) some products may receive negative allocations of joint costs.
18) Which of the following statements is true concerning the practice of carrying inventories at NRV?
A) It is an inevitable result of joint cost allocation.
B) It results for the NRV method of joint cost allocation.
C) It results from the constant gross margin NRV method.
D) It is a widely-accepted practice.
E) It results in income recognition before sales are made.
Answer the following question(s) using the information below:
The Morton Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result. The following information was collected for the month of October:
Production:
condensed goat milk
26,100 litres
skim goat milk
32,400 litres
Sales:
condensed goat milk
$3.50 per litre
skim goat milk
$2.50 per litre
The costs of purchasing the 65,000 litres of unprocessed goat milk and processing it up to the splitoff point to yield a total of 58,500 litres of salable product was $72,240. There were no inventory balances of either product.
Condensed goat milk may be processed further to yield 19,500 litres (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $3 per usable litre. Xyla can be sold for $18 per litre.
Skim goat milk can be processed further to yield 28,100 litres of skim goat ice cream, for an additional processing cost per usable litre of $2.50. The product can be sold for $9 per litre.
There are no beginning and ending inventory balances.
19) What is the estimated net realizable value of Xyla at the splitoff point?
A) $182,650
B) $252,900
C) $292,500
D) $351,000
E) $280,750
20) What is the estimated net realizable value of the skim goat ice cream at the splitoff point?
A) $182,650
B) $252,900
C) $110,200
D) $85,450
E) $194,400
