May 24, 2022/ Steven Bragg
The relative sales value method is a technique used to allocate joint costs based on the prices at which products will be sold. For example, a production process incurs $100 of costs in order to create two products, one of which (Product A) will sell for $400 and
the other (Product B) for $100. Under this method, 80% of the $100 joint cost is assigned to Product A. The calculation is: $100 joint cost x ($400 ÷ ($400+$100)) = $80 The remaining 20% of the $100 joint cost is assigned to Product B. The calculation is: $100 joint cost x ($100 ÷ ($400+$100)) = $20 The resulting cost allocation equitably spreads costs across products, resulting in roughly the same
margins for each product. However, product margins may still vary, depending on the costs incurred by each product after the allocation point. Cost Accounting Fundamentals COST ACCOUNTING AND CONTROL QUIZ 2 AY 2020-2021 MULTIPLE CHOICE: 1.The characteristic which is most often used to distinguish a product as either a joint product or a by-product is the A.Amount of labor used in processing the product. B.Amount of separable product costs that are incurred in processing. C.Amount (i.e., weight, inches, etc.) of the product produced in the manufacturing process. D. Relative sales value of the products produced in the process. 2.Which of the following components of production are allocable as joint costs when a single manufacturing process produces several salable products? A.Materials, labor and overhead B.Materials and labor only C.Labor and overhead only D.Overhead and materials only 3.Joint costs are used for: A.Setting the selling price of a product. B.Determining whether to continue producing an item. C.Controlling costs D.Determining inventory costs for accounting purposes 4.Which of the following statements about joint-cost allocation is false? A.Joint-cost allocation is useful in deciding whether to further process a product after split- off. B.Joint-cost allocation is useful in making a profit determination about individual C.Joint-cost allocation is helpful in inventory valuation. D.Joint-cost allocation can be based on the number of units produced. 5.The joint-cost allocation method that recognizes the revenues at split-off but does not consider any further processing costs is the: A. Relative-sales-value method B.Net-realizable-value method C.Physical-units method D.Reciprocal-accounting method 6.For purposes of allocating joint costs to joint products using the relative sales value of split- off method, the costs beyond split-off. A.Are allocated in the same manner as the joint costs. B.Are deducted from the relative sales value at split-off. C.Are deducted from the sales value at the point of sale. D.Do not affect the allocation of the joint costs. 7.The method of pricing by products/scrap where no value is assigned to these items until they are sold is known as the A.Net realizable value at split-off point method. B.Sales value at split-off method. C.Realized value approach. D.Approximated net realizable value at split-off method. 8. All costs that are incurred between the split-off point and the point of sale are known as a.Sunk costs b.Split-off point c.Transfer to finished goods inventory Which method allocates joint costs on the basis of each product's relative sales value at the Splitoff point?The sales value at splitoff method allocates joint costs to joint products produced during the accounting period on the basis of the relative total sales value at the splitoff point. The estimated net realizable value method is used when the market selling prices at the splitoff point are NOT available.
What are the joint cost allocation method for by products?Three methods of allocating joint product costs are the physical units method, the market value method, and the net realizable method. The constant gross margin percentage method is also used to allocate joint cost.
What method is most commonly used for allocating joint processing costs to joint products?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.
How do you calculate allocated cost of joints?To use this method, simply divide the total production cost by the appropriate measure of output volume to yield the cost per unit of output. One type of monetary measure of joint cost allocation is the sales value method.
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For purposes of allocating joint costs to joint products using the relative sales value at
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