ACCT2102Tutorial 84Net Realisable ValueAdvantages: Allocates joint costs using ultimate net value of each product; applicablewhen the option to process further existsDisadvantages: High information needs; Makes assumptions about expectedoutcomes of future processing decisionsConstant Gross-Margin percentage methodAdvantage: Since it is necessary to produce all joint products, they all look equallyprofitable.Disadvantages:High information needs.All products are not necessarily equallyprofitable; method may lead to negative cost allocations so that unprofitable productsare subsidised by profitable ones.3.When selling prices for all products exist at splitoff, the sales value at split off method is thepreferred technique.It is a relatively simple technique that depends on a common basis forcost allocation – revenues.It is better than the physical method because it considers therelative market values of the products generated by the joint cost when seeking to allocate it(which is a surrogate for the benefits received by each product from the joint cost).Further,the sales value at splitoff method has advantages over the NRV method and the constantgross margin percentage method because it does not penalize managers by charging morefor developing profitable products using the output at splitoff, and it requires no assumptionsabout future processing activities and selling prices.10-29 Joint-cost allocation, process further or sell.1.a.Sales value at splitoff method.MonthlyUnitOutputSellingPricePer UnitSales Valueof Total Prodn.at Splitoff%WeightingJoint CostsAllocatedStuds (blg)75,000$8$600,0006.1539$461,539Dec. pieces5,00060300,00023.0769230,769Posts20,00020400,00030.7692307,692Totals$1,300,000100.0000$1,000,000b.Physical measure method.PhysicalMeasure ofTotal Prodn.%WeightingJoint CostsAllocatedStuds (blg75,00075.00$750,000Dec. pieces5,0005.0050,000Posts20,00020.00200,000Totals100,000100.00$1,000,000 Show Video TranscriptOkay. Alright. So let uh let the limitations of the physical measure method of giant cast allocation include let and part. Uh This is the physical where it's used by allocating joint cars. Right? So the physical, the physical, the physical where it's the physical words used used by allocating used by allocating joint are allocating joint castes. Uh That may help. That may have no relation relationship relationship to the to the revenue, relationship to the revenue producing, to the revenue producing to the revenue producing. Power up up there. The power of the individual products, Right? Individual individual uh products. Right? And in part B let them be. The joint products may not have a common the joint the joint products may not have may not have a common, these may not have a common physical. Common physical. Ah Do you know miniatures? Right. Physical denominator. Right. And for example, one may be a liquid while another maybe a salad with no readily available convergent character. Right? So one should be a liquid and another one should be a solid red Give two limitations of the physical-measure method of joint-cost allocation.  Q: Explain the implementation issues of the cost estimation methods A: Cost estimation is the process of determining the probable cost of a product before starting the… Q: Define and give examples of the following terms: cost pool, cost object, and cost allocation (or… A: Responsibility accounting: Responsibility refers to the several concepts and tools used by managers… Q: Define the following terms: joint products, joint costs, and split-off point. A: Joint Products: When two are more products are produced in a process using the same basic raw… Q: Of the various methods used to allocate joint costs, which makes the most sense to you? A: In accounting a joint cost is referred to as that cost that is related to more than one product.… Q: Explain the following terms: practical capacity, cost of resources supplied, cost of resources used,… A: Resource: It refers to a supply that can be used for producing the benefits or by making use of… Q: Classify the following cost drivers as structural, executional, or operational. A: Classification of cost derives: Classification 0f the given cost drivers as structural, executional,… Q: Explain why standard costing is more suitable for controlling the cost of unit-level activities A: Standard costing is a cost accounting method in which predetermined levels of sales, production,… Q: Which of the following would be an acceptable measure of activity for a material handling activity… A: For a material handling activity cost pool, number of material moves and weight of materials moved… Q: What are the limitations of joint product and departmental cost allocation? A: The limitations of joint product and departmental cost allocation. Q: In a homogeneous cost pool, all costs have a similar cause-and-effect relationship with the cost-… A: The homogeneous cost pool is a collection of different costs whose changes are based on single base.… Q: The following are approaches in allocating joint costs incurred up to split off point, except: a.… A: Solution: The following are approaches in allocating joint costs incurred up to split off point,… Q: Which among the following alternative methods of costing is related to the best use of physical… A: Since you have asked multiple questions, we will answer the first full question for you. Please… Q: a) Classify each cost element as either fixed, variable, or mixed A: Cost Accounting: Fixed Cost: The cost which constant for the year and there is no impact of any… Q: Why aren’t common costs allocated to segments under the contribution approach? A: Segment margin is a useful measure to assess the performance of an operating unit. A common fixed… Q: Explain the following concepts: indirect materials Mixed cost Budgeting Margin of safety A: The total manufacturing cost of the product is determined by including the direct material, labor,… Q: Prepare a complete service cost allocation report with details using the following method:… A: total overhead of admin dept= p150000 + 20% overhead of IT dept… Q: Discuss the disadvantages of Absorption Costing for cost control and performance evaluation. A: Absorption Costing: Absorption costing is a method for calculating the full cost or total cost of a… Q: Explain the relationship between the costs of flexible and committed resources, usage of resources,… A: Cost accounting system: Cost accounting system of an organization consists of procedures and… Q: Why does dual cost allocation improve the resulting allocation of service department costs? A: Dual Cost Allocation segregates total costs into two parts Fixed Costs. Variable Costs. Each… Q: Explain the advantages of conference method for estimating a cost function. A: Conference method: Conference method uses, perceptions, analysis, knowledge and related information… Q: What costs are assigned to a segment under the contribution approach? A: Contribution approach is approach used to present income statement in which all the variable costs… Q: Match the term with the co decentralized cost center A: (1) Decentralized = This type of company typically promotes from within Reason: This type of company… Q: Using the NRV method, the amount of joint costs allocated to Jaxton is: A: Joint cost refers to the cost of producing two or more products that are gone through the same… Q: ost classifications used for assigning costs to cost objects include: Multiple Choice Variable cost… A: Cost Classification Determining the cost in the organisation is one of the important part in the… Q: Explain three common approaches of system cutover. Also describe their advantages and disadvantages. A: System cutover: System cutover is defined as the conversion of data from old systems to the new… Q: What is the difference between a structural cost driver and an executional cost driver? Provide… A: Cost driver: cost driver is a particular unit or specific activity that is responsible for a change… Q: An alternative concept of fairness in cost allocation, absent the cause-and-effect basis, includes? A: A cause and effect allocation basis is the cost allocation method in which the allocation base is… Q: What are the advantages and disadvantages of ABC relative to the step-down method of cost… A: ABC means Activity Based Costing. Costs will be allocated based on the activities the organization… Q: Explain a hybrid costing system. Identify a product or service operation that might be suited to a… A: Hybrid Costing: Hybrid costing is a method of cost accounting in which the elements of job and… Q: The joint costs allocated to product Y were A: Joint costs are those costs which are incurred for producing two or more than two products at the… Q: Describe the evaluation techniques to consider multiple projects that are mutually exclusive? A: Following are the evaluation techniques to consider multiple projects that are mutually exclusive:… Q: Combine the different component costs to determine the firm’s WACC. A: WACC is the organization cost of capital in which each component (debt and equity) is considered on… Q: From the standpoint of cost control, why is the FIFO method superior to the weighted-averagemethod? A: First-In-First-Out (FIFO) Method: It is a method of managing inventory of an organization. Under a… Q: Provide three reasons for allocating joint costs to individual products or services. A: Joint Cost: Joint costing is a cost accounting term, which is referred to common costs incurred in… Q: Describe factors for measuring cost allocation. A: Cost: It is the economic value incurred by the company to manufacture a product or render a… Q: Dual allocation is a cost allocation approach that separates direct and indirect costs, tracing the… A: Dual allocation method: It involves two type of cost pools, fixed cost and variable cost. Q: Explain and illustrate a hybrid costing system A: Hybrid costing system is that costing system which has components of both process costing and job… Q: What is the primary advantage of separately allocating fixed and variable indirect costs? A: Solution Concept Fixed cost Fixed cost are those cost which does not change with the… Q: A concept which is commonly employed with allocation bases related to size is A: Cost Allocation: The process of assigning the cost to the cost object is cost allocation. The cost… Q: What is a potential disadvantage of the reciprocal method? a. It is the most complex method of cost… A: Reciprocal method: It is the method in which the allocation of costs spent on other departments by… Q: Using a physical measurement method, what amount of joint processing cost is allocated to product B?… A: Cost accounting is one of the branches of accounting. Under this branch, all types of costs incurred… Q: Explain the strategic role of cost estimation. A: Cost estimation: Cost estimation is a technique that assist the management for taking strategic… Q: Explain the implementation problems in cost estimation. A: Cost estimation: It is the development of a defined relationship between cost object and cost… Knowledge Booster Learn more about Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below. SEE MORE QUESTIONS Recommended textbooks for you Financial And Managerial Accounting ISBN:9781337902663 Author:WARREN, Carl S. Publisher:Cengage Learning, Managerial Accounting ISBN:9781337912020 Author:Carl Warren, Ph.d. Cma William B. Tayler Publisher:South-Western College Pub Principles of Cost Accounting ISBN:9781305087408 Author:Edward J. Vanderbeck, Maria R. Mitchell Publisher:Cengage Learning Survey of Accounting (Accounting I) ISBN:9781305961883 Author:Carl Warren Publisher:Cengage Learning Cornerstones of Cost Management (Cornerstones Ser... ISBN:9781305970663 Author:Don R. Hansen, Maryanne M. Mowen Publisher:Cengage Learning Principles of Accounting Volume 2 ISBN:9781947172609 Author:OpenStax Publisher:OpenStax College Financial And Managerial Accounting ISBN:9781337902663 Author:WARREN, Carl S. Publisher:Cengage Learning, Managerial Accounting ISBN:9781337912020 Author:Carl Warren, Ph.d. Cma William B. Tayler Publisher:South-Western College Pub Principles of Cost Accounting ISBN:9781305087408 Author:Edward J. Vanderbeck, Maria R. Mitchell Publisher:Cengage Learning Survey of Accounting (Accounting I) ISBN:9781305961883 Author:Carl Warren Publisher:Cengage Learning Cornerstones of Cost Management (Cornerstones Ser... ISBN:9781305970663 Author:Don R. Hansen, Maryanne M. Mowen Publisher:Cengage Learning Principles of Accounting Volume 2 ISBN:9781947172609 Author:OpenStax Publisher:OpenStax College How does the physical measure method allocate joint costs?The physical measure allocates joint costs to primary products based on a physical characteristic, such as units produced, or pounds or tons produced, barrels produced, or some other physical measure that is appropriate for the volume of output of the primary products.
What are the 3 methods that joint costs can be allocated?Three methods of allocating joint product costs are the physical units method, the market value method, and the net realizable method.
What is the physical quantities method of allocation?Quantitative or physical unit method attempts to distribute the total joint cost on the basis of some unit of measurement, such as pounds, gallons, tons, or board feet. Of course, the unit products must be measurable by the basic measurement unit.
Which method is the best for joint cost allocation?The two major methods of allocating joint costs are (1) the net realizable value method and (2) the physical quantities method. The net realizable value method allocates joint costs to products based on their net real- izable values at the split-off point.
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Select two limitations of the physical-measure method of joint-cost allocation.
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