Product C Is One of Several Joint Products That Come

question 52

Multiple Choice

Product C is one of several joint products that come out of Department M.The joint costs incurred in Department M total $40,000.Product C can be sold at split-off or processed further and sold as a higher quality item.The decision to process further should be based on the:

• A) assumption that the $40,000 is irrelevant.
• B) allocation of the $40,000,using the net realizable value.
• C) allocation of the $40,000,using a physical measures approach.
• D) allocation of the $40,000,using the relative sales value at split-off methoD.
• The decision should not depend upon allocations.The joint cost is irrelevant.

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Definitions:

Indirect Method

A cash flow statement presentation method that adjusts net income for changes in balance sheet accounts to calculate cash flow from operating activities.

Operating Activities

The day-to-day actions that a business undertakes to generate revenue, as reflected in the cash flow statement.

Statement of Cash Flows

A financial report that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.

Indirect Method

A way of calculating cash flows for operating activities in the cash flow statement by adjusting net income for changes in non-cash items.