CHAPTER 16
COST ALLOCATION: JOINT PRODUCTS AND BYPRODUCTS
16-1 Exhibit 16-1 prents many examples of joint products from four different general industries. The include:
Industry Separable Products at the Splitoff Point
Food
沙斑鸡Processing:
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• Lamb • Lamb cuts, tripe, hides, bones, fat
• Turkey • Breasts, wings, thighs, poultry meal
Extractive:
• Petroleum • Crude oil, natural gas
16-2 A joint cost is a cost of a production process that yields multiple products simultaneously.
A s eparable cost is a cost incurred beyond the splitoff point that is assignable to each of the specific products identified at the splitoff point.
16-3 The distinction between a joint product and a byproduct is bad on relative sales value.
A joint product is a product from a joint production process (a process that yields two or more products) that has a relatively high total sales value. A byproduct is a product that has a relatively low total sales value compared to the total sales value of the joint (or main) products.
16-4 A product is any output that has a positive sales value (or an output that enables a company to avoid incurring costs). In some joint-cost ttings, outputs can occur that do not have a positive sales value. The offshore processing of hydrocarbons yields water that is recycled back into the ocean as well as yielding oil and gas. The processing of mineral ore to yield gold and silver also yields dirt as an output, which is recycled back into the ground.
16-5 The chapter lists the following six reasons for allocating joint costs:
1. Computation of inventoriable costs and cost of goods sold for financial accounting
purpos and reports for income tax authorities.
2. Computation of inventoriable costs and cost of goods sold for internal reporting purpos.
3. Cost reimburment under contracts when only a portion of a business's products or
rvices is sold or delivered under cost-plus contracts.
4. Insurance ttlement computations for damage claims made on the basis of cost
information of joint products or byproducts.
5.Rate regulation when one or more of the jointly-produced products or rvices are subject
to price regulation.
6.Litigation in which costs of joint products are key inputs.
16-6 The joint production process yields individual products that are either sold this period or held as inventory to be sold in subquent periods. Hence, the joint costs need to be allocated between total production rather than just tho sold this period.
16-7 This situation can occur when a production process yields parable outputs at the splitoff point 励志早安语
that do not have lling prices available until further processing. The result is that lling prices are not available at the splitoff point to u the sales value at splitoff method. Examples include processing in integrated pulp and paper companies and in petro-chemical operations.
16-8 Both methods u market lling-price data in allocating joint costs, but they differ in which sales-price data they u. The sales value at splitoff method allocates joint costs to joint products on the basis of the relative total sales value at the splitoff point of the total production of the products during the accounting period. The net realizable value method allocates joint costs to joint products on the basis of the relative net realizable value (the final sales value minus the parable costs of production and marketing) of the total production of the joint products during the accounting period.
16-9 Limitations of the physical measure method of joint-cost allocation include:
a. The physical weights ud for allocating joint costs may have no relationship to the
revenue-producing power of the individual products.
b.The joint products may not have a common physical denominator––for example, one
may be a liquid while another a solid with no readily available conversion factor.
16-10The NRV method can be simplified by assuming (a) a standard t of post-splitoff point processing steps, and (b) a standard t of lling prices. The u of (a) and (b) achieves the same benefits that the u of standard costs does in costing systems.
16-11The constant gross-margin percentage NRV method takes account of the post-splitoff point “profit” contribution earned on individual products, as well as joint costs, when making cost assignments to joint products. In contrast, the sales value at splitoff point and the NRV methods allocate only the joint costs to the individual products.
16-12No. Any method ud to allocate joint costs to individual products that is applicable to the problem of joint product-cost allocation should not be ud for management decisions regarding whether a product should be sold or procesd further. When a product is an inherent result of a joint process, the decision to process further should not be influenced by either the size of the total joint costs or by the portion of the joint costs assigned to particular products. Joint costs are irrelevant for the decisions. The only relevant items for the decisions are the incremental revenue and the incremental costs beyond the splitoff point.
16-13 No. The only relevant items are incremental revenues and incremental costs when making de
cisions about lling products at the splitoff point or processing them further. Separable costs are not always identical to incremental costs. Separable costs are costs incurred beyond the splitoff point that are assignable to individual products. Some parable costs may not be incremental costs in a specific tting (e.g., allocated manufacturing overhead for post-splitoff processing that includes depreciation).
16-14Two methods to account for byproducts are:
a. Production method—recognizes byproducts in the financial statements at the time
production is completed.
b.Sales method—delays recognition of byproducts until the time of sale.
保温杯品牌16-15 The sales byproduct method enables a manager to time the sale of byproducts to affect reported operating income. A manager who was below the targeted operating income could adopt a “fire-sale” approach to lling byproducts so that the reported operating income exceeds the target. This illustrates one dysfunctional aspect of the sales method for byproducts.
16-16 (20-30 min.) Joint-cost allocation, insurance ttlement.
1. (a) Sales value at splitoff method:
Pounds of Product Wholesale Selling Price per Pound Sales Value at Splitoff Weighting:
Sales Value
at Splitoff
Joint Costs Allocated Allocated Costs per Pound Breasts Wings Thighs Bones Feathers 100
20
40
80 10 250 $0.55 0.20 0.35 0.10 0.05 $55.00 4.00 14.00 8.00 0.50 $81.50 0.675 0.049 0.172 0.098 0.006 1.000 $33.75 2.45 8.60 4.90 0.30 $50.00
0.3375 0.1225 0.2150 0.0613 0.0300
Costs of Destroyed Product
Breasts: $0.3375 per pound × 40 pounds = $13.50
Wings: $0.1225 per pound × 15 pounds = 1.84 $15.34
b. Physical measure method:
Pounds of Product Weighting: Physical Measures Joint Costs Allocated Allocated
Costs per
Pound
Breasts Wings Thighs Bones Feathers 100 20
40
80 10
250 0.400 0.080 0.160 0.320 0.040 1.000 $20.00 4.00 8.00 16.00 2.00 $50.00
$0.200 0.200 0.200 0.200 0.200
Costs of Destroyed Product
Breast: $0.20 per pound × 40 pounds = $ 8
Wings: $0.20 per pound × 15 pounds = 3 $11
Note : Although not required, it is uful to highlight the individual product profitability figures:
Sales Value at Splitoff Method Physical
Measures Method
Product Sales Value Joint Costs Allocated Gross Income Joint Costs Allocated Gross
Income
Breasts Wings Thighs Bones Feathers $55.00 4.00 14.00 8.00 0.50 $33.75 2.45 8.60 4.90 0.30 $21.25 1.55 5.40 3.10 0.20 $20.00 4.00 8.00 16.00 2.00 $35.00 0.00
6.00
(8.00)
(1.50)
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2. The sales-value at splitoff method captures the benefits-received criterion of cost allocation and is the preferred method. The costs of processing a chicken are allocated to products in proportion to the ability to contribute revenue. Quality Chicken’s decision to process chicken is heavily influenced by the revenues from breasts and thighs. The bones provide relatively few benefits to Quality Chicken despite their high physical volume.
The physical measures method shows profits on breasts and thighs and loss on bones and feathers. Given that Quality Chicken has to jointly process all the chicken products, it is non-intuitive to single out individual products that are being procesd simultaneously as making loss while the overall operations make a profit. Quality Chicken is processing chicken mainly for breasts and thighs and not for wings, bones, and feathers, while the physical measure method allocates a disproportionate amount of costs to wings, bones and feathers.
县委办公室16-17 (10 min.) Joint products and byproducts (continuation of 16-16).
1. Ending inventory:
Breasts 15 × $0.3375 = $5.06
Wings 4 × 0.1225 = 0.49
Thighs 6 × 0.2150 = 1.29
Bones 5 × 0.0613 = 0.31
Feathers 2 × 0.0300 = 0.06
$7.21
2.
Joint products Byproducts研究生面试自我介绍
Net Realizable Values of byproducts:
Breasts Wings Wings $ 4.00
Thighs Bones Bones 8.00
Feathers Feathers 0.50
$12.50
Joint costs to be allocated:
Joint costs – Net Realizable Values of byproducts = $50 – $12.50 = $37.50
Pounds of Product Wholesale走读申请书怎么写
Selling Price
per Pound Sales Value at Splitoff Weighting: Sales Value at Splitoff Joint Costs Allocated Allocated Costs Per Pound
Breast
100 $0.55 $55 55 ÷ 69 $29.89 $0.2989 Thighs 40 0.35 14 14 ÷ 69 7.61 0.1903
$69 $37.50
Ending inventory:
Breasts 15 × $0.2989 $4.48
Thighs 6 × 0.1903 1.14 $5.62
3. Treating all products as joint products does not require judgments as to whether a product is a joint product or a byproduct. Joint costs are allocated in a consistent manner to all products for the purpo of costing and inventory valuation. In contrast, the approach in requirement 2 lowers the joint cost by the amount of byproduct net realizable values and results in inventory values being shown for only two of the five products, the ones (perhaps arbitrarily) designated as being joint products.
16-18 (10 min.) Net realizable value method.
A diagram of the situation is in Solution Exhibit 16-18.
Corn Syrup Corn Starch Total Final sales value of total production,
12,500 × $50; 6,250 × $25
$625,000 $156,250 $781,250 Deduct parable costs 375,000
93,750 468,750 Net realizable value at splitoff point $250,000 $ 62,500 $312,500 Weighting, $250,000; $62,500 ÷ $312,500 0.8 0.2
Joint costs allocated, 0.8; 0.2 × $325,000 $260,000 $ 65,000 $325,000
SOLUTION EXHIBIT 16-18 (all numbers are in thousands)
Splitoff
Point
