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A) byproduct cost B) joint cost C) main cost D) separable cost Answer: B Diff: 2 Terms: joint costs Objective: 1 AACSB: Reflective thinking 2) All costs incurred beyond the splitoff point that are assignable to one or more individual products are called: A) byproduct costs B) joint costs C) main costs D) separable costs Answer: D Diff: 2 Terms: separable costs, splitoff point Objective: 1 AACSB: Reflective thinking 3) In joint costing: A) costs are assigned to individual products as assembly of the product occurs B) costs are assigned to individual products as disassembly of the product occurs C) a single production process yields two or more products D) Both B and C are correct. Answer: D Diff: 3 Terms: joint costs Objective: 1 AACSB: Reflective thinking are costs of a production process that yields multiple products simultaneously. For example, in processing of beef, the yield includes steaks, roasts, and hamburger in addition to cowhide and other products. Joint costs are incurred prior to the splitoff point The splitoff point is defined as the point in the production process at which two or more products become separately identifiable are costs incurred beyond the splitoff point and include manufacturing, marketing, distribution, and other costs. The outputs of a joint production process yield products with positive sales value as well as outputs having no sales value. Only those outputs having positive sales value or that enable the company to avoid incurring costs are referred to as products. A main product is the one product having a high total sales value emerging from a joint production process If the process yields two or more products with high sales values, they are referred to as joint products -An output of a joint production process having a low sales value is referred to as a byproduct -In practice the distinction between main products, joint products, and byproducts may be difficult to determine joint cost are allocated to individual product for a number of reasons: 1.Determination of inventoriable costs and cost of goods sold for external financial reporting and income tax determination. 2.Determination of inventoriable costs and cost of goods sold for internal reporting purposes such as division profitability analysis. 3.Cost reimbursement when a company has cost-reimbursement contracts as with a government agency joint cost are allocated to individual product for a number of reasons:(part 2) 1.Insurance-settlement computations for damage claims made on the basis of cost information of jointly produced products. 2.Rate regulation for one or more of the joint products. 3.Litigation in which costs of joint products are key inputs. It is important to note that joint-cost allocation should not be used for decision-making or performance-evaluation purposes, as the allocations lack any cause-and-effect relationship. Market based data (sales revenue) • Sales-value at splitoff method • Net-realizable value (NRV) method • Constant gross-margin percentage NRV method Weight, quantity, or volume. sales value at split-off method allocates joint costs to joint products on the basis of relative sales value at the splitoff point. Sales value of the production rather than sales is used because the costs were incurred in all units produced, not just those sold. This method follows the benefits-received criterion discussed in an earlier chapter. allocates joint costs on the basis of a comparable physical measure such as weight or volume at the splitoff point. This method is considered less desirable due to the fact that physical measures usually have no relationship to the revenue-generating abilities of a product net realizable value (NRV) method allocates joint costs to joint products on the basis of final sales value minus separable costs. This method makes the assumption that products will be processed beyond the splitoff point. It is often used when selling prices for products at splitoff do not exist. constant-gross margin percentage NRV Method allocates joint costs to joint products in such a manner that each individual product has the same gross-margin percentage. This method can result in negative allocations of joint costs. The sales-value at splitoff method is the preferred method when selling-price data exist at splitoff for a number of reasons: • It measures the value of the product at the splitoff point. This is seen as the best measure of benefits received as a result of joint processing. • It does not anticipate subsequent management decisions. This method does not require information about any processing occurring after the splitoff point. • There is a common basis to allocate joint costs to products. All products can be measured by anticipated revenues from the product. It is a simple method. The NRS and constant gross-profit margin percentage NRV calculations can become quite complex Explain why joint costs are irrelevant in a sell-or-process-further decision 1.As mentioned, joint costs
are irrelevant for decision-making purposes. 2.The concept of relevant costs and revenues should be applied in the decision to sell or process further. If the additional revenues from further processing exceed the additional costs from this processing, the product should receive further processing. Explain why joint costs are irrelevant in a sell-or-process-further decision (PART 2) 3. Likewise, there can be the potential for conflict between cost concepts used for decision-making purposes and cost concepts used for performance evaluation. Using market-based methods of joint cost allocation tend to reduce these conflicts. 4. Joint costs allocated to joint products should not be used in making pricing decisions for joint products, as there is no cause-and-effect relationship that identifies resources demanded by each joint product that can be used as a basis for pricing. Two methods are utilized to account for byproducts • The production method recognizes byproducts at the time production is completed. The NRV of the byproduct is offset against the costs of the main product. • The sales method recognizes the byproduct at the time of sale. No entries are made until the byproduct is sold. Revenues from the sale are reported as a revenue item in the period sold. These revenues can be grouped with sales, treated as other income, or deducted from cost of goods sold. What is joint cost?In accounting, a joint cost is a cost incurred in a joint process. Joint costs may include direct material, direct labor, and overhead costs incurred during a joint production process. A joint process is a production process in which one input yields multiple outputs.
Are the costs of a production process that yields multiple products simultaneously?Joint costs are the costs of a production process that yields multiple products simultaneously.
What is joint cost in process costing?Some costs benefit more than one product or process in the manufacturing process. These costs are called Joint cost. Almost all manufacturers incur joint costs at some level the manufacturing process. It can also be defined as the cost to operate joint-product processes including the disposal of waste.
What is a joint cost quizlet?Joint Costs. the cost of a production process that yields multiple products simulatenously. Split-off point. the juncture in a joint production process where two or more products become separately identifiable. Separable Costs.
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Joint costs are the costs of a production process that yields multiple products simultaneously
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