Allocations of Joint Product Costs Can Be Based on the Relative

question 1

Multiple Choice

Allocations of joint product costs can be based on the relative market values of the products:

• A) And never on the relative physical quantities of the products.
• B) Plus an adjustment for future excess margins.
• C) And not on any other basis.
• D) At the time the products are separated.
• E) Only if the products contain both direct and indirect costs.

Understand the principles of activity-based costing (ABC) and how it allocates manufacturing overhead to products.

Calculate the percentage of total overhead costs assigned to specific products using ABC data.

Apply activity rates to determine the cost allocation for different activity cost pools.

Interpret data from ABC systems to determine product costs.

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Definitions:

Manufacturing Departments

Specialized subdivisions within a manufacturing facility where different stages of the production process are carried out.

Markup

A term used in accounting and finance to describe the difference between the cost of a good or service and its selling price.

Activity At Capacity

The level of operations where a company or a production process is utilizing all available resources without any waste.

Fixed Manufacturing Overhead

Indirect manufacturing costs that do not change with the level of production, such as salaries of managers and depreciation of factory equipment.