31) Using the sales value at splitoff method, what is the gross-margin percentage for skim goat milk at the splitoff point?
A) 51.74%
B) 50.00%
C) 35.83%
D) 48.26%
Answer: C
GM percentage
$53,302/$148,750 = 0.3583
$49,718/$138,750 = 0.3583
32) How much (if any) extra income would Green earn if it produced and sold all of the Xyla from the condensed goat milk? Allocate joint processing costs based upon relative sales value on the splitoff. (Extra income means income in excess of what Green would have earned from selling condensed goat milk.)
A) $576,552
B) $132,250
C) $523,250
D) $181,968
33) How much (if any) extra income would Green earn if it produced and sold skim milk ice cream from goats rather than goat skim milk? Allocate joint processing costs based upon the relative sales value at the splitoff point.
A) $132,250
B) $576,552
C) $523,250
D) $181,968
34) Chem Manufacturing Company processes direct materials up to the splitoff point where two products (X and Y) are obtained and sold. The following information was collected for the month of November:
Direct materials processed:10,000 gallons (10,000 gallons yield 9,500 gallons of good product and 500 gallons of shrinkage)
Production:X5,000 gallons
Y4,500 gallons
Sales:X4,750 at $150 per gallon
Y4,000 at $100 per gallon
The cost of purchasing 10,000 gallons of direct materials and processing it up to the splitoff point to yield a total of 9,500 gallons of good products was $975,000.
The beginning inventories totaled 50 gallons for X and 25 gallons for Y. Ending inventory amounts reflected 300 gallons of Product X and 525 gallons of Product Y. October costs per unit were the same as November.
Using the physical-volume method, what is Product X’s approximate gross-margin percentage?
A) 32%
B) 34%
C) 35%
D) 38%
35) Beverage Drink Company processes direct materials up to the splitoff point where two products, A and B, are obtained. The following information was collected for the month of July:
Direct materials processed:2,500 liters (with 20% shrinkage)
Production:A1,500 liters
B500 liters
Sales:A$15.00 per liter
B$10.00 per liter
The cost of purchasing 2,500 liters of direct materials and processing it up to the splitoff point to yield a total of 2,000 liters 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 liters of Product Z5 for an additional processing cost of $150. Product Z5 is sold for $25.00 per liter. There was no beginning inventory and ending inventory was 125 liters.
Product B may be processed further to yield 375 liters of Product W3 for an additional processing cost of $275. Product W3 is sold for $30.00 per liter. There was no beginning inventory and ending inventory was 25 liters.
If Product Z5 and Product W3 are produced, what are the expected sales values of production, respectively?
A) $11,250 and $34,375
B) $22,500 and $ 5,000
C) $31,250 and $10,500
D) $34,375 and $11,250
36) Cola Drink Company processes direct materials up to the splitoff point where two products, A and B, are obtained. The following information was collected for the month of July:
Direct materials processed:2,500 liters (with 20% shrinkage)
Production:A1,500 liters
B500 liters
Sales:A$15.00 per liter
B$10.00 per liter
The cost of purchasing 2,500 liters of direct materials and processing it up to the splitoff point to yield a total of 2,000 liters 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 liters of Product Z5 for an additional processing cost of $150. Product Z5 is sold for $25.00 per liter. There was no beginning inventory and ending inventory was 125 liters.
Product B may be processed further to yield 375 liters of Product W3 for an additional processing cost of $275. Product W3 is sold for $30.00 per liter. There was no beginning inventory and ending inventory was 25 liters.
What is Product Z5’s estimated net realizable value at the splitoff point?
A) $11,100
B) $22,350
C) $34,225
D) $34,375
37) Which of the following is true of the physical-measure approach of allocating joint costs?
A) Costs cannot be allocated if the measurement basis for each product are different.
B) Physical measures usually result in less costs being allocated to the product that weighs the most.
C) The physical measure reflects a product’s ability to generate revenues.
D) Obtaining comparable physical measures for all products is always straightforward.
Answer the following questions using the information below:
The Kenton Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The following information was collected for the month of June:
Direct Materials processed:18,000 gallons (after shrinkage)
Production:
Butter Cream
7,500
gallons
Condensed Milk
10,500
gallons
Sales:
Butter Cream
7,000
gallons
Condensed Milk
10,000
gallons
Sales Price:
Butter Cream
$3.5
per gallon
Condensed Milk
$7.5
per gallon
Separable costs in total:
Butter Cream
$12,500
Condensed Milk
$34,700
The cost of purchasing the of unprocessed milk and processing it up to the splitoff point to yield a total of 18000 gallons of saleable product was $46,000.
The company uses constant gross-margin percentage NRV method to allocate the joint costs of production.
38) What is the constant gross-margin percent for Kenton?
A) 10%
B) 6.3%
C) 11%
D) 6.5%
39) What is the allocated joint costs of Condensed Milk?
A) $35,200
B) $10,800
C) $12,500
D) $34,700
40) What is the allocated joint costs of Butter Cream?
A) $35,200
B) $12,500
C) $34,700
D) $10,800
The Correct Answer and Explanation is :
Let’s break down each question one by one:
Question 31: Gross-Margin Percentage for Skim Goat Milk at Splitoff Point
This question calculates the gross-margin percentage for skim goat milk at the splitoff point. The formula for the gross-margin percentage is:
[
\text{GM Percentage} = \frac{\text{Gross Margin}}{\text{Sales Value at Splitoff}}
]
We have two examples showing:
[
\frac{53,302}{148,750} = 0.3583 \quad \text{or} \quad 35.83\%
]
Thus, the correct answer is:
C) 35.83%
Question 32: Extra Income from Producing and Selling Xyla from Condensed Goat Milk
To determine extra income, we need to compare the sales value from selling condensed goat milk directly with the income that would be earned if the milk was processed further into Xyla. The joint processing costs are allocated based on the relative sales value.
This requires calculating the difference in income from both scenarios, taking into account the relevant sales prices and costs. The correct answer is:
C) $523,250
Question 33: Extra Income from Producing and Selling Skim Milk Ice Cream
This question compares the income from selling skim milk ice cream to selling the skim goat milk itself. Similar to question 32, this requires an evaluation of potential income versus actual sales at the splitoff point. The correct answer is:
D) $181,968
Question 34: Gross-Margin Percentage for Product X Using Physical-Volume Method
The physical-volume method allocates joint costs based on the physical quantity of each product. Using the formula for gross-margin percentage:
[
\text{Gross Margin Percentage} = \frac{\text{Sales Value – Joint Costs Allocated}}{\text{Sales Value}}
]
We need to calculate the costs and sales for both products, then determine the percentage. The correct answer is:
B) 34%
Question 35: Expected Sales Values of Z5 and W3
Here, we calculate the expected sales values after further processing Products A and B into Z5 and W3. This involves multiplying the quantities by their selling prices:
[
Z5 = 1,375 \times 25 = 34,375 \quad \text{and} \quad W3 = 375 \times 30 = 11,250
]
So, the correct answer is:
D) $34,375 and $11,250
Question 36: Estimated Net Realizable Value of Product Z5
Net realizable value (NRV) for further processed products is the expected sales value minus additional processing costs. For Z5:
[
NRV = 34,375 – 150 = 34,225
]
So, the correct answer is:
C) $34,225
Question 37: Physical-Measure Approach of Allocating Joint Costs
The physical-measure approach allocates joint costs based on a measurable physical quantity (e.g., weight, volume). The correct answer is:
A) Costs cannot be allocated if the measurement basis for each product is different.
Question 38: Constant Gross-Margin Percent for Kenton
The constant gross-margin percentage can be calculated using the net realizable value (NRV) method for joint cost allocation. The correct answer is:
B) 6.3%
Question 39: Allocated Joint Costs of Condensed Milk
Using the constant gross-margin percentage method, the joint costs are allocated proportionally. The allocated joint costs for Condensed Milk are:
A) $35,200
Question 40: Allocated Joint Costs of Butter Cream
Similarly, the joint costs allocated to Butter Cream are:
D) $10,800
Explanation of Methods:
- Gross-Margin Percentage is calculated by dividing the gross margin by the total sales value at the splitoff point. It provides an indicator of profitability at the point of separation.
- Constant Gross-Margin Percentage Method: This method helps allocate joint costs by maintaining a consistent gross margin across different products, based on their expected net realizable value (NRV). NRV is calculated by considering the selling price and subtracting any additional processing costs.
- Physical-Volume Method: This method allocates joint costs based on physical units produced, such as gallons, kilograms, or liters, without considering the relative sales value.