Cost Allocation Techniques Paper 5


Fitzpatrick Corporation uses a joint manufacturing process in the production of two products, Gummo and Xylo. Each batch in the joint manufacturing process yields 5,000 pounds of an intermediate material, Valdene, at a cost of $20,000. Each batch of Gummo uses 60% of the Valdene and incurs $10,000 of separate costs. The resulting 3,000 pounds of Gummo sells for $10 per pound. The remaining Valdene is used in the production of Xylo, which incurs $12,000 of separable costs per batch. Each batch of Xylo yields 2,000 pounds and sells for $12 per pound. Fitzpatrick uses the net realizable value method to allocate the joint material costs. The company is debating whether to process Xylo further into a new product, Zinten, which would incur an additional $4,000 in costs and sell for $15 per pound. If Zinten is produced, income would increase by


A company manufactures several products that originate in a joint process and are separated at a split-off point. Which one of the following methods of joint-cost allocation would allocate the same unit cost to each separable product?


Indirect and common costs often make up a significant portion of the cost of a product. All of the following are reasons for indirect cost allocation to cost objects except to


If all of the joint products are sold at the split-off point and an overall profit is made on all of the products, which one of the following joint costing methods will result in the same gross margin percentage on each joint product?


Stone Company manufactures two products that incur joint costs of $60,000. It costs an additional $10,000 to produce 5,000 units of Product 1 and an additional $30,000 to produce 10,000 units of Product 2. Product 1 is sold for $8 per unit, and Product 2 is sold for $10 per unit. If the company uses the net realizable value method to allocate joint costs, the cost per unit of Product 1 is


Units of production is an appropriate overhead allocation base when


When the amount of overapplied factory overhead is significant, the entry to close overapplied factory overhead will most likely require


The appropriate method for the disposition of underapplied or overapplied overhead of a manufacturer


Which method of measuring the costs to be assigned to products or services uses budgeted rates for direct costs but applies those rates to the actual quantities of the inputs?


When Nash Glassworks Company allocates fixed costs, management will select a capacity level to use as the denominator volume. All of the following are appropriate as the capacity level that approximates actual volume levels except


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