Joint Products and By-Products
Self Test
Cost Accounting
Self Test
Click the “Check Your Answer” box below each question to reveal the correct answer and explanation.
1. Which of the following has the most value?
a. joint product
b. scrap
c. by product
d. all have the same value
Answer
2. A joint process is
a. many processes that occur at the same time producing more than one product
b. many processes that occur at the same time producing only one product
c. one process that produces more than one of the same product
d. one process that produces more than one type of product
Answer
D. A joint process is one process that produces more than one type of product.
3. Waste is recognized as the result of a manufacturing process and
a. is excess raw materials that can be used in the next process
b. has no value and is not resalable
c. has value and can be sold to a customer
d. none of the above
Answer
B. Waste has not value, can not be sold, and can not be used in another manufacturing process.
4. Scrap is recognized as
a. the primary product of a manufacturing process sold for a small amount
b. an incidental product of a manufacturing process that is sold for a small amount
c. materials that have no value and are not resalable
d. a by product that is sold for a very high dollar amount
Answer
B. Scrap is an incidental product that does not have enough value to justify the cost of the manufacturing process. It has minimal value and may be resold if there is a willing buyer who can find value in the scrap.
5. By Product is recognized as
a. the primary product of a manufacturing process sold for a small amount
b. incidental product of a manufacturing process that is sold for a small amount
c. materials that have no value and are not resalable
d. a by product that is sold for a very high dollar amount
Answer
B. Scrap and By Product mean the same thing. A by product is an incidental product that does not have enough value to justify the cost of the manufacturing process. It has minimal value and may be resold if there is a willing buyer who can find value in the by product.
6. The split-off point is the point where
a. products are identifiable as separate products
b. the product is always in the form it is sold to the customer
c. more joint costs are added and production continues
d. no more costs are ever added
Answer
A. The point where products are identified as separate products is the split-off point. The product many or may not be sold at this point. All joint costs are added prior to the split-off point (c.). Further (separate) processing costs may be added to the different products after split-off if it is economically beneficial.
7. Further processing costs occur
a. before the split off point
b. when delivering the goods to the customer
c. only when products are sold at split-off
d. only when products are not sold at split-off
Answer
D. Further processing costs occur after split-off. This is only necessary when products are not sold at split-off. These costs are separately identifiable to a product.
8. An allocation based on physical measurement is based on
a. the total dollar amount
b. approximate net realizable value
c. quantity
d. net realizable value
Answer
C. Quantity is a physical measurement. All other allocation bases listed are monetary.
9. Allocating joint costs using sales value at split off allocates based on
a. total costs incurred
b. total expected sales to customers
c. total costs incurred before split-off
d. total expected income from selling the products
Answer
B. Sales value at split-off is the total expected sales to customers and is calculated by multiplying units sold by sales price at split-off for each product.
10. Allocating joint costs using net realizable value allocates based on
a. total expected sales to customers
b. total expected sales to customers less cost to sell or dispose
c. total costs incurred before split-off
d. total expected contribution from selling the products
Answer
B. Net realizable value is the sales price at split off less costs to sell or dispose. Joint costs are not included in the % base for any allocation method. Contribution margin from the product does include joint processing costs.
11. Joint costs can be allocated using net realizable value when
a. all products are processed further
b. no products are ever processed further
c. the process gives very little scrap
d. all products can be sold at split off
Answer
D. The net realizable value method is used only when all products can be sold at split-off. Some products will be processed further, but it is not required for sale. How much scrap occurs is not a factor in deciding the allocation method.
12. Joint costs can be allocated using approximate net realizable value when
a. all products have costs to sell
b. no products are always processed further
c. the process gives very little scrap
d. all products can not be sold at split off
Answer
D. The approximate net realizable value method is used to allocate joint costs when all products identified at split-off are not sold at split-off. Identifiable products must be processed further in order for them to be sold to customers.
13. When recording costs in a joint manufacturing process
a. only joint costs are recorded directly to each product
b. all joint manufacturing costs are recorded to the “joint WIP” account first
c. all manufacturing costs are initially recorded to cost of goods sold
d. process costing is always used
Answer
B. Joint costs are always added to “work in process – joint” and then allocated to each individual product work in process account. A joint process may use job costing. Joint costs must be allocated before determining the cost of each product.
14. The indirect, net realizable value for accounting for scrap recognizes
a. cash received as other income
b. cash received as an increase to work in process
c. net cash received as a reduction to cost of goods sold
d. net cash received as an increase to other income
Answer
C. This method records the sales price less added processing costs (the net received) as a direct reduction to cost of goods sold.
15. The realized value approach for accounting for scrap records
a. additional cost incurred as a reduction to cost of goods sold
b. additional cost incurred as an increase to work in process
c. net cash received as a reduction to cost of goods sold
d. cash received as an increase to other income when scrap is always sold
Answer
B. This method records additional costs incurred as an increase to inventory costs and the sales price less added processing costs as other income. It may also record additional costs to cost of goods sold and the full sales price to other income. (See your notes – this is not consistent among textbooks)