HGT Corporation Produces Four Products from a Common Production Process

question 9

Multiple Choice

HGT Corporation produces four products from a common production process. Selected data from HGT's accounting system for the four products appears below: Joint costs for the accounting period totalled $5,000. Each product line has a different product manager who is evaluated based on product line profitability. Therefore each manager is motivated to reduce his / her total product line costs as much as possible. The managers have been given information about potential joint cost allocations using the following three methods: physical output, sales at split-off point, and net realizable value. The managers are comparing the joint cost allocations under each method so that they can give the accountant input about their preferred method(s) .
Which product line(s) would receive the least amount of joint cost under the sales value at the split-off point method?

• A) Floor cushions
• B) Full-body pillows
• C) Sofa cushions and standard pillows
• D) None of the above

---

Definitions:

Construct Validity

Construct validity refers to the extent to which a test or instrument measures the theoretical construct it is intended to measure.

Differential Validity

Differential validity is the extent to which a test predicts outcomes differently for distinct groups, often analyzed to assess fairness across demographics.

Validation Studies

Research conducted to ensure that a tool, test, or method accurately measures what it is supposed to measure.

Concurrent Validity

A measure of how well a new test predicts outcomes according to an established benchmark or criterion test, carried out at the same time.