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Unformatted text preview: Business Environment & Concepts 5 Class Questions 1 2009 DeVry/Becker Educational Development Corp. All rights reserved. 1. CPA-03477 A processing department produces joint products Ajac and Bjac, each of which incurs separable production costs after split-off. Information concerning a batch produced at a $60,000 joint cost before split-off follows: Separable Sales Product costs value Ajac $ 8,000 $ 80,000 Bjac 22,000 40,000 $30,000 $120,000 What is the joint cost assigned to Ajac if costs are assigned using the relative net realizable value? a. $16,000 b. $40,000 c. $48,000 d. $52,000 CPA-03477 Choice "c" is correct. Using the relative net realizable value method of allocating the joint costs, the net realizable value of both products needs to be calculated: Ajac Bjac Sales $ 80,000 $40,000 Separable costs (8,000 ) (22,000 ) Net realizable value $ 72,000 $18,000 The joint costs are allocated based on relative net realizable values. The two products together have a net realizable value of $90,000 ($72,000 + $18,000). Ajac contributes 80% of this total (72,000 / $90,000 = 80%). 80% of the joint costs are thus allocated to Ajac: 80% x $60,000 = $48,000. Choice "a" is incorrect. This answer uses only the separable costs, not the net realizable value. The sales value must also be taken into consideration. Choice "b" is incorrect. This answer uses only the sales value, not the net realizable value. The separable costs must also be taken into consideration. Choice "d" is incorrect. The net realizable value (sales value less separable costs) must be computed in order to allocate the joint costs using the net realizable value method. Business Environment & Concepts 5 Class Questions 2 2009 DeVry/Becker Educational Development Corp. All rights reserved. 2. CPA-03584 Mason Company uses a job-order cost system and applies manufacturing overhead to jobs using a predetermined overhead rate based on direct-labor dollars. The rate for the current year is 200 percent of direct-labor dollars. This rate was calculated last December and will be used throughout the current year. Mason had one job, No. 150, in process on August 1 with raw materials costs of $2,000 and direct-labor costs of $3,000. During August, raw materials and direct labor added to jobs were as follows: No. 150 No. 151 No. 152 Raw materials $ $4,000 $1,000 Direct labor 1,500 5,000 2,500 Actual manufacturing overhead for the month of August was $20,000. During the month, Mason completed Job Nos. 150 and 151. For August, manufacturing overhead was: a. Overapplied by $4,000. b. Underapplied by $7,000. c. Underapplied by $2,000. d. Underapplied by $1,000. CPA-03584 Choice "c" is correct. Since manufacturing overhead is applied on the basis of direct-labor dollars, the total of the direct-labor dollars for August must first be determined: $1,500 + $5,000 + $2,500 = $9,000 Manufacturing overhead is applied at the rate of 200%, so $18,000 was applied for the month of August (200% x $9,000 = $18,000). August (200% x $9,000 = $18,000)....
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This note was uploaded on 02/19/2011 for the course BMGT 360 taught by Professor Spina during the Spring '07 term at Maryland.
- Spring '07