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2009 B-5 Class Questions Preview

2009 B-5 Class Questions Preview - Business Environment...

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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.

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