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Chapter 11 - Service Department and Joint Cost Allocation
Chapter 11
Service Department and Joint Cost Allocation
True / False Questions
1. The human resource department in a manufacturing company would be considered a

service department.
True False
2. One reason to allocate service department costs to user departments is to encourage the user
departments to monitor their use of the service department costs.
True False
3. The direct method makes no cost allocations between or among service departments.
True False
4. The selection of an allocation base in the direct method is easier than the selection of an
allocation base in the step method.
True False
5. The step method allocates some, but not all, service department costs to other service
departments.
True False
6. One advantage of the step method is that all reciprocal services are recognized between
service departments.
True False
11-1
7. With the reciprocal method, the total service department costs less the direct costs of the
service department equals the cost allocated to the service department.
True False
8. One potential disadvantage of the reciprocal method is it could overstate the cost of running
the organization's service departments.
True False
9. In deciding whether to outsource a service department or not, the cost of the service
department should be estimated using the step method of allocation.
True False
10. Joint products are outputs from common inputs and a common production process.
True False
11. Joint costs are processing costs incurred after the split-off point in a common production
process.
True False
12. The estimated net realizable value for a product is its estimated selling price after
processing the product beyond the split-off point.
True False
13. In general, it is better to use a product's market value at the split-off point than its
estimated net realizable value in allocating joint costs.
True False
11-2
14. The estimated net realizable value at the split-off point is calculated by taking the sales
value after further processing and deducting the additional processing costs.
True False
15. If a company's two joint products can be sold at the split-off point, there is no reason for
allocating the joint costs to the products.
True False
16. The physical quantities method of allocating joint costs is often used when the output
sales prices are highly volatile.
True False
17. The physical quantities method allocates joint costs so that each joint product has the
same gross margin as a percentage of sales.
True False
18. In a sell-or-process-further decision, the additional costs incurred after the split-off point
are irrelevant.
True False
19. In a sell-or-process-further decision, the common costs incurred prior to the spilt-off point
are irrelevant.
True False
20. Since by-products have minor sales value, alternative methods of accounting for them will
not have a material effect on the financial statements.
True False
11-3
Multiple Choice Questions
21. Which of the following is the least practical reason for allocating service department costs
to user departments?
A. To ascertain profitability of user departments.
B. To evaluate performance of managers and divisions.
C. To make user departments aware that services are costly.
D. To provide the best possible service to users.
22. Service department costs are

A. generally treated as period costs rather than product costs.
B. reported as selling and administrative expenses on the income statement.
C. eventually applied by the user departments to the units produced.
D. seldom found in manufacturing organizations.
23. A management purpose for allocating joint costs of a processing center to the various
products produced is to
A. establish inventory values for unsold units.
B. record accurate cost of sales by product line.
C. compute total processing cost variances by product.
D. report correct standard product costs for comparative analysis.
24. Which of the following service departments could logically use space occupied (square
footage) to allocate its costs to user departments?
A. Material Handling
B. Cafeteria
C. Custodial Services
D. Cost Accounting
E. Engineering
11-4
25. Which of the following departments is not a service department in a typical manufacturing
company?
A. Assembly
B. Accounting
C. Human resources
D. Information processing
26. Criteria for selecting allocation bases for service department allocations should not
include
A. direct, traceable benefits from the service.
B. the extent of facilities provided.
C. the ease of making an allocation.
D. sales dollars generated during the period.
27. Which of the following statements is (are) false regarding the direct method of allocating
service department costs?
(A) The selection of an allocation base in the direct method is easier than the selection of an
(B) Once an allocation is made from a service department using the direct method, no further
allocations are made back to that department.
A. Only A is false.
B. Only B is false.
C. Neither A nor B is false.
D. Both A and B are false.
28. Which of the following methods provides no data for service departments to monitor each
other's costs?
A. Direct method.
B. Reciprocal method.
C. Step method.
D. All three methods, Direct, Reciprocal, and Step, provide data for monitoring costs.
11-5
29. If two service departments service the same number of departments, which service
department's costs should be allocated first when using the step method?
A. The service department that provides the most service to other service departments.
B. The service department that provides the most service to the user departments.
C. The service department with the least cost.
D. The service department that provides the least service to other service departments.
E. The service department that provides the least service to the user departments.
30. Which of the following is a weakness of the step method of service cost allocations?
A. Computations are more complex than the reciprocal method.
B. All interdepartmental services are ignored.
C. All intradepartmental services are ignored.
D. The order of service department allocation has to be determined.
31. LaCrescent University has 20 departments. Two of its best departments are the (1)
College of UBW (Underwater Basket Weaving) and (2) Testing Services. The College of
UBW attempts to teach students the difficult, but useful, skill of weaving baskets underwater.
Testing Services grades examinations for professors. How would these two departments be
classified?
A. a
B. b
C. c
D. d
11-6
32. Joint products and byproducts are produced simultaneously by a single process or series of
processes and
A. joint products are salable at the split-off point, but byproducts are not.
B. byproducts are salable at the split-off point, but joint products are not.
C. the revenue from byproducts may be recognized at the time of production.
D. all byproducts must be allocated some portion of joint costs.
33. Which of the following best describes the objective of joint cost allocation?
A. Inventory valuation.
B. Pricing goods for sale.
C. Making decisions about levels of production.
D. Making decisions about raw materials requirements.
34. Allocated joint costs are useful for

A. setting the selling price of a product.
B. determining whether to continue producing an item.
C. controlling user department costs.
D. evaluating management by means of a responsibility reporting system.
E. determining inventory cost for accounting purposes.
35. Which of the following cost items is not allocable as joint costs when a single
manufacturing process produces several main products and several by-products?
A. Direct materials
B. Variable overhead
C. Direct labor
D. Fixed overhead
E. Freight-out
36. For purposes of allocating joint costs to joint products, the estimated net realizable value
at split-off is equal to
A. final sales price reduced by cost to complete after split-off.
B. sales price less a normal profit margin at the point of sale.
C. separable product cost plus a normal profit margin.
D. total sales value less joint costs at point of split-off.
11-7
37. The method of accounting for joint product costs that will produce the same gross margin
percentage for all products is the
A. replacement method.
B. physical quantities method.
C. net realizable value method.
D. units produced method.
38. Which of the following statements is false?

A. The estimated net realizable value for a product is its estimated selling price after
B. In general, it is better to use a product's market value at the split-off point than its estimated
net realizable value.
C. The estimated net realizable value at the split-off point is calculated by taking the sales
D. It is better to use the net realizable value method for allocating joint costs than the
estimated net realizable value method.
39. Net realizable value at the split-off point is used to allocate
A. a
B. b
C. c
D. d
11-8
40. Which of the following is not a physical measure that can be used for allocating joint costs
using the physical quantities method?
A. Tons of steel
B. Ounces of gold
C. Dollars of labor
D. Feet of lumber
41. 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.
42. The characteristic that is most often used to distinguish a product as either a main product
or a by-product is the amount of
A. sales value of the products produced during the common production process.
B. direct manufacturing costs (e.g., materials) incurred before the split-off point.
C. physical measures in the products produced during the common production process.
D. time (i.e., labor) required to produce the products from start to finish.
43. Products with a relatively minor sales value are called

A. scrap.
B. spoilage.
C. by-products.
D. main products.
11-9
44. Bagley Company has two service departments and two producing departments. Square
footage of space occupied by each department follows:
The department costs of Custodial Services are allocated on a basis of square footage of
space. If Custodial Services costs are budgeted at $38,000, the amount of cost allocated to
General Administration under the direct method would be
A. $0.
B. $7,125.
C. $6,000.
D. $5,700.
45. Castle Company has two service departments and two producing departments. The
number of employees in each department is
The department costs of the Personnel Department are allocated on a basis of the number of
employees. If these costs are budgeted at $37,125 during a given period, the amount of cost
allocated to Department B under the direct method would be
A. $0.
B. $17,187.50.
C. $16,875.00.
D. $18,021.84.
11-10
Cincinnati Million, Inc. operates two user divisions as separate cost objects. To determine the
costs of each division, the company allocates common costs to the divisions. During the past
month, the following common costs were incurred:
The following information is available concerning various activity measures and service
usages by each of the divisions:
46. If common computer service costs are allocated using computer time as the allocation
basis, what is the computer cost allocated to Division B?
A. $136,190
B. $137,647
C. $144,444
D. $173,333
47. Using the most appropriate allocation basis, what is the personnel cost allocated to
Division A?
A. $58,143
B. $74,643
C. $76,463
D. $110,000
11-11
48. If all common costs are allocated using operating profit as the allocation basis, what is the
total cost allocated to Division B?
A. $457,286
B. $512,714
C. $555,000
D. $1,087,576
49. Castle Company has two service departments and two user departments. The number of
employees in each department is
The fixed costs of the Personnel Department are allocated on a basis of the number of
allocated to the Cafeteria under the step method would be
A. $0.
B. $1,718.75.
C. $1,687.50.
D. $1,802.18.
11-12
The Emery Construction Company occupies 85,000 square feet for construction of mobile
homes. There are two manufacturing departments, finishing and assembly, and four service
departments labeled S1, S2, S3 and S4. Information relevant to Emery is as follows:
Rent paid for the area used is $720,000
50. How much rent is allocable to the assembly department using the direct method of
allocation?
A. $420,000
B. $332,500
C. $300,000
D. $252,000
51. How much rent would be charged to S4 using the step method of allocation and a S3-S4-
S1-S2 sequence for the allocations?
A. $36,000
B. $40,000
C. $54,000
D. $90,000
11-13
Computer Complex, Inc. has two main services: (1) time on a timeshared computer system,
and (2) proprietary computer programs. Computer time is provided by the operation
department (Op) and programs are written by the programming department (P)
The percentage of each service used by each department for a typical period is:
In a typical period, the operation department (Op) spends $4,500 and the programming
department (P) spends $2,500.
52. Under the step method (Op first), what is the cost of the computer time and the computer
programs for sale?
A. a
B. b
C. c
D. d
E. e
53. Under the reciprocal method what is the algebraic solution to the cost allocation problem?
A. Op = 4,500 + .40 P; P = 2,500 + .30 Op.
B. Op = 4,500 + .70 P; P = 2,500 + .60 Op.
C. Op = 2,500 + .40 P; P = 4,500 + .30 Op.
D. Op = 2,500 + .70 P; P = 4,500 + .60 Op.
11-14
The RAH Manufacturing Company has two service departments: Maintenance and
Accounting. The Maintenance Department's costs of $300,000 are allocated on the basis of
machine hours. The Accounting Department's costs of $120,000 are allocated on the basis of
the number of employees within a specific department. The direct departmental costs for A
and B are $300,000 and $500,000, respectively.
54. What is the Maintenance Department's cost allocated to Department A using the direct
method?
A. $92,000
B. $230,000
C. $276,000
D. $386,400
55. What is the Accounting Department's cost allocated to Department B using the direct
method?
A. $40,000
B. $80,000
C. $20,000
D. $10,000
56. What is the Maintenance Department's cost allocated to Department B using the step
method and assuming the Maintenance Department's costs are allocated first?
A. $276,000
B. $230,000
C. $322,000
D. $23,810
11-15
57. What is the cost of the Accounting Department's cost allocated to Department A using the
stefp method and assuming the Maintenance Department's costs are allocated first?
A. $81,333
B. $81,587
C. $80,000
D. $68,571
Harry Dishman owns and operates Harry's Septic Service and Legal Advice. Harry's two
revenue generating (production) operations are supported by two service departments:
Clerical and Janitorial. Costs in the service departments are allocated in the following order
using the designated allocation bases:
Clerical:
Variable cost: expected number of work orders processed
Fixed cost: long-run average number of work orders processed
Janitorial:
Variable cost: labor hours
Fixed cost: square footage of space occupied
Average and expected activity levels for next month (June) are as follows:
Expected costs in the service departments for June are as follows:
11-16
58. Under the step method of allocation, how much Clerical service cost should be allocated
to the Septic Service operation for June? (Assume Clerical costs are allocated before Janitorial
costs and round all calculations to the nearest whole dollar.)
A. $12,689
B. $13,100
C. $13,620
D. $15,596
E. $16,070
59. Under the direct method of allocation, what is the total amount of service cost allocated to
the Legal Advice operation for June? (Round all calculations to the nearest whole dollar.)
A. $6,231
B. $7,720
C. $8,640
D. $9,330
E. $9,804
The following information relates to Ray Corporation for the past accounting period.
60. Using the simultaneous solution method, department A's cost allocated to department C is
A. $48,000
B. $58,800
C. $60,619
D. $98,000
11-17
61. Using the simultaneous solution method, department B's cost allocated to department C is
A. $29,021
B. $14,021
C. $13,192
D. $7,794
The following set up is a system of simultaneous linear equations to allocate costs using
reciprocal method. Matrix algebra is not required.
The following costs were incurred in three operating departments and three service
departments in Reality Company.
Use of services by other departments is as follows.
62. The equation for department P1 (subassemblies) is

A. P1 = $550,000 + .25P2 + .20P3 + .15S2 + 10S3.
B. P1 = $550,000 + .30S1 + .50S2 + .20S3.
C. P1 = .30S1 + .50S2 + 20S3.
D. P1 = .30S1 + .50S.
11-18
63. The equation for department P2 (final assembly) is

A. P2 = .25S1 + .50S2 + .30S3.
B. P2 = $775,000 + .25P2 + .20P3 + .15S2 + .10S3.
C. P2 = $775,000 + .30S1 + .50S2 + .20S3.
D. P2 = $775,000 + .25S1 + .50S2 + .30S3.
64. The equation for department P3 (marketing) is

A. P3 = $285,000 + .20S1 + .20S3.
B. P3 = $285,000 + .20S1 + .60S2 + .20S3.
C. P3 = $285,000 + .20S1 + .20S2 + .60S3.
D. P3 = $285,000 + .50S1 + .50S3.
65. The equation for department S1 (building occupancy) is

A. S1 = .10S3.
B. S1 = $85,000 + 1.00S3.
C. S1 = $85,000 + .10S3.
D. S1 = $85,000 + .90S2 + .10S3.
66. The equation for department S2 (research and development) is

A. S2 = $120,000 + .15S1 + .65S2 + .20S3.
B. S2 = .15S1 + 20S3.
C. S2 = $120,000 + .15S1 + .20S3.
D. S2 = $120,000 + .40S1 + .60S3.
67. The equation for department S3 (supervision) is

A. S3 = $45,000 + .90S1 + .10S2.
B. S3 = $45,000 + .10S1.
C. S3 = $45,000 + 1.00S1.
D. S3 = .10S1.
11-19
68. Products X, Y, and Z are produced from the same process at a cost of $5,200. Five
thousand pounds of raw material yields 1,500 X, 2,500 Y, and 1,000 Z. Selling prices are: X
$2 per unit, Y $4 per unit, Z valueless. The ending inventory of X is 50 units. What is the
value of the ending inventory if joint costs are allocated using net realizable value?
A. $21.67.
B. $31.20.
C. $40.00.
D. $42.00.
69. Lite Co. manufactures products X and Y from a joint process that also yields a by-product,
Z. Revenue from sales of Z is treated as a reduction of joint costs. Additional information is as
follows:
Joint costs were allocated using the net realizable value method at split-off approach. The
joint costs allocated to product X were
A. $75,000.
B. $100,800.
C. $150,000.
D. $168,000.
11-20
70. Great Falls Company makes two products, G and H. They are initially processed from the
same raw material and then, after split-off, further processed separately. Additional
information is as follows:
What are the joint costs allocated to products G and H assuming Great Falls uses the
estimated net realizable value approach?
A. a
B. b
C. c
D. d
Vreeland, Inc., manufactures products X, Y, and Z from a common process. Joint costs were
$60,000. Additional information is as follows:
11-21
71. Assuming that joint production costs are allocated using the physical quantities method
(units produced), what were the costs allocated to Product X?
A. $27,000.
B. $29,000.
C. $33,000.
D. $30,000.
72. Assuming that joint product costs are allocated using the net realizable value method,
what were the total costs assigned to Product Y?
A. $26,000.
B. $26,796.
C. $27,000.
D. $28,286.
73. Raymer Corporation produced 3,660 units, consisting of three separate products, in a joint
process for the year. The market for these products was so unstable that it was not practical to
estimate the selling price of the products. A cost of $425,000 was incurred in the joint
process. Product X's production was 80% of product Y's while product Z's production was
125% of product Y's. What is the amount of the joint cost allocable to product X assuming
Raymer uses the physical quantities method of allocation?
A. $111,475
B. $114,865
C. $139,344
D. $141,667
11-22
74. Zebra Manufacturing Company incurred a joint cost of $600,000 in the production of R
and S in a joint process. Presently, 1,800 of R and 1,400 of S are being produced each month.
Management plans to decrease R's production by 300 units in order to increase the production
of S by 500 units. Additionally, this change will require minor modifications, which will add
$20,000 to the joint cost. This cost is entirely attributable to product S. What is the amount of
the joint costs allocable to R and S before changes to existing production assuming Zebra
allocates their joint costs according to the proportion of S and R produced?
A. a
B. b
C. c
D. d
11-23
75. Lankip Company produces two main products and a by-product out of a joint process. The
ratio of output quantities to input quantities of direct material used in the joint process remains
consistent from month to month. Lankip has employed the physical-volume method to
allocate joint production costs to the two main products. The net realizable value of the by-
product is used to reduce the joint production costs before the joint costs are allocated to the
main products. Data regarding Lankip's operations for the current month are presented in the
chart below. During the month, Lankip incurred joint production costs of $2,520,000. The
main products are not marketable at the split-off point and, thus, have to be processed further.
The amount of joint production cost that Lankip would allocate to the Second Main Product
by using the physical quantities method to allocate joint production costs would be
A. $1,200,000
B. $1,260,000
C. $1,500,000
D. $1,575,000
The Moody Company produced three joint products at a joint cost of $100,000. Two of these
products were processed further. Production and sales were:
11-24
76. If the estimated net realizable value method is used and product Q is accounted for as a
main product, how much of the joint costs would be allocated to product R?
A. $38,889
B. $41,667
C. $50,000
D. $62,500
77. Assume Q is a by-product and Moody uses the cost reduction method of accounting for
by-product cost. If estimated net realizable value is used, how much of the joint costs would
be allocated to product R?
A. $38,889
B. $43,750
C. $50,000
D. $62,500
78. If joint costs are allocated based on relative weight of the outputs and all products are
main products, how much of the joint costs would be allocated to product P?
A. $43,750
B. $50,000
C. $60,000
D. $62,500
79. What is the net income of Moody Company if the estimated net realizable value method
of joint cost allocation is used?
A. $20,000
B. $50,000
C. $150,000
D. $350,000
11-25
80. Anchorage Company manufactures three main products, L, M and N, from a joint process.
Additional information for June production activity follows:
Assuming that the 10,000 units of N were processed further and sold for $78,000 what was
Anchorage's gross profit from this sale? Assume the physical quantities method of allocation
is used.
A. $21,000
B. $28,500
C. $30,000
D. $66,000
81. The Freed Company produces three products, X, Y, and Z from a single raw material
input. Product Y can be sold at the split-off point for total revenues of $50,000 or it can be
processed further at a total cost of $16,000 and then sold for $68,000. Product Y
A. should be sold at the split-off point, rather than processed further.
B. would increase the company's overall net income by $18,000 if processed further and then
sold.
C. would increase the company's overall net income by $68,000 if processed further and then
sold.
D. would increase the company's overall net income by $2,000 if processed further and then
sold.
82. There are several methods for allocating service department costs to production
departments. The method which recognizes service provided by one service department to
another but does not recognize reciprocal interdepartmental service is called: (CMA adapted)
A. direct method.
B. variable method.
C. linear method.
D. reciprocal method.
E. step-down method.
11-26
83. Because this allocation method recognizes that service departments often provide each
other with inter-departmental service, it is theoretically considered to be the most accurate
method for allocating service department costs to production departments. This method is:
(CMA adapted)
A. direct method.
B. variable method.
C. linear method.
84. For the purposes of allocating joint costs to joint products, the sales price at the point of
sale, reduced by the cost to complete after split-off, is assumed to be equal to the (CPA
adapted)
A. total costs.
B. joint costs.
C. sales price less a normal profit margin at point of sale.
D. relative sales value at split-off.
85. In joint product costing and analysis, which one of the following costs is relevant when
deciding the point at which a product should be sold in order to maximize profits? (CMA
adapted)
A. separable costs after the split-off point
B. joint costs to the spilt-off point
C. sales salaries for the period when the units were produced
D. purchase costs of the materials required for the joint products
E. the company president's salary
11-27
Essay Questions
86. Computer Information Services is a computer software consulting company. Its three
major functional areas are computer programming, information systems consulting, and
software training. Carol Birch, a pricing analyst in the Accounting Department, has been
asked to develop total costs for the functional areas. These costs will be used as a guide in
pricing a new contract. In computing these costs, Birch is considering three different methods
of allocating overhead costs-the direct method, the step method, and the reciprocal method.
Birch assembled the following data on overhead from its two service departments, the
Information Systems Department and the Facilities Department.
Information systems is allocated on the basis of hours of computer usage; facilities are
allocated on the basis of floor space.
Required:
Allocate the service department costs to the user departments using the direct method. (Round
to the nearest dollar and provide total user department costs)
11-28
Required:
Allocate the service department costs to the user departments using the step method. Allocate
Information Systems first and round to the nearest dollar. Provide total user department costs.
11-29
Required:
Allocate the service department costs to the user departments using the reciprocal method.
Round to the nearest dollar.
11-30
89. The Darl Company conducts a simple chemical process in Department #1, which produces
three separate items: A, K, and H. A is processed further in Department #2. K is processed
further in Department #3. Product H is a byproduct, to be accounted for by the cost reduction
method. The following information relates to September:
Department #1's costs $420,000
A: 25,000 pounds completed; 23,500 pounds sold for $12 per pound.
K: 75,000 pounds completed; 70,000 pounds sold for $7.50 per pound.
H: 10,000 pounds completed; 10,000 pounds sold for $1.50 per pound. (There are shipping
costs of $0.30 per pound.)
There were no September 1st inventories.
Required: Prepare a schedule to show the computation for the unit costs per pound for
Products A, K, and H assuming Darl uses the estimated net realizable value method to
allocate joint costs to the main products.
11-31
further in Department #3. Product H is a byproduct, to be accounted for by the other revenue
Products A, K, and H assuming Darl uses the physical quantities method to allocate joint costs
to the main products.
91. The McClean Manufacturing Company started the production of K1 (its main product)
and S2 (its byproduct) on January 2, 2010. During 2010, 7,500 units of K1 and 1,500 units of
S2 were produced. In 2010, 6,000 units of K1 and 1,000 units of S2 were sold at $57.00 and
$1.10 per unit, respectively. Production was halted at the end of 2010 and the inventory was
sold in 2011 at the normal selling prices. The joint production costs were $240,000 and are
entirely avoidable. The separable costs to produce K1 were $2.60 per unit and to produce S2
were $.45 per unit. Operating expenses were $60,000 in 2010 and $12,000 in 2011.
Required:
a. Prepare an income statement for 2010 and 2011 assuming the "other revenue" method of
accounting for byproducts is used.
b. Prepare an income statement for 2010 and 2011, assuming the "cost reduction" method of
11-32
92. Canadian Mills, Inc. operates a sawmill facility. The company accounts for the sawdust
that result from the primary sawing operation as a by-product. The sawdust is sold to another
company at a price of $1.00 per hundred cubic feet. Normally, sales revenue from the sawdust
is $21,200 per month. The sawdust is charged to inventory at $2.20 per hundred cubic feet,
although there is no direct cost to process it.
As an alternative, the company can rent equipment that will process the dust into imitation
logs for fireplaces. These logs sell for $25.00 per hundred to wholesalers, who package and
scent them. 75 logs can be produced from 100 cubic feet of sawdust.
Cost of the equipment to produce these logs and the additional personnel required to operate
the equipment are $360,000 per month, regardless of the output.
Required:
A) Should the company sell the sawdust for $1.00 per hundred cubic feet or process it into
imitation logs? Support your answer with the appropriate calculations.
11-33
93. A manufacturing company uses a joint production process that produces three products at
the split-off point. Joint production costs during April were $720,000. The company uses the
net realizable value method for allocating joint costs. Product information for April was as
follows:
Required:
a. Assume that all three products are main products and that they can be sold at the split-off
point or processed further, whichever is economically beneficial to the company. Allocate the
joint costs to the three products.
b. Assume that the company uses the physical quantities method to allocate the joint costs.
How much would be allocated to each of the three products?
11-34
94. Petro-Chem Inc. is a small company that acquires high-grade crude oil from low-volume
production wells owned by individuals and small partnerships. The crude oil is processed in a
single refinery into Two Oil, Six Oil, and impure distillates. Petro-Chem does not have the
technology or capacity to process these products further and sells most of its output each
month to major refineries. There were no inventories on November 1.
Production and sales

Two Oil, 300,000 barrels produced; 280,000 barrels sold at $20 each.
Six Oil, 240,000 barrels produced; 220,000 barrels sold at $30 each.
Distillates, 120,000 barrels produced and sold at $15 per barrel.
Required:
a. Allocate the joint costs to the products using the physical quantities method,
b. Allocate the joint costs to the products using the net realizable value method.
11-35
95. Harry Dorffman owns and operates Harry's Abstracting Service. Harry's two revenue
generating operations (Abstracting Services and Closing Services) are supported by two
service departments: Clerical and Custodial. Costs in the service departments are allocated in
the following order using the designated allocation bases.
Clerical: number of transactions processed
Custodial: square footage of space occupied
Average and expected activity levels for next month are as follows:
Required:
Use the direct method to allocate the service department costs to the revenue generating
departments. Provide the total costs for the revenue departments.
11-36
generating operations Abstracting Services and Closing Services are supported by two service
departments: Clerical and Custodial. Costs in the service departments are allocated in the
following order using the designated allocation bases.
Required:
a. Use the step method to allocate the service department costs to the revenue generating
departments. Assume Clerical costs are allocated before Custodial costs and round all
calculations to the nearest whole dollar. Provide the total costs for the revenue departments.
b. Use the step method to allocate the service department costs to the revenue generating
departments but now assume Custodial costs are allocated before Clerical costs. Provide the
total costs for the revenue departments.
11-37
Required:
Use the reciprocal method to allocate the service department costs to the revenue generating
11-38
98. Daz Manufacturing Company buys Liquid Charcoal for $.80 a gallon. At the end of
processing in department 1, the liquid charcoal splits off into Products U, V, and W. Product
U is sold at the split-off point, with no further processing. Products V and W require further
processing before they can be sold; Product V is processed in Department 2, and Product W is
processed in Department 3. Following is a summary of costs and other related data for the
most recent accounting period:
There were no beginning inventories and there was no liquid charcoal on hand at the end of
the period. All gallons on hand in ending inventory were complete as to processing. Daz uses
the estimated net realizable value method of allocating joint costs.
Required:
a. Determine the product cost for U, V and W, assuming the physical quantity method is used
to allocate joint costs.
b. Determine the product cost for U, V and W, assuming the net realizable value method is
used to allocate joint costs.
11-39
99. The Tworek Company conducts a simple chemical process in Department #1, which
produces three separate items: A, B, and C. A is processed further in Department #2. B is
processed further in Department #3. Product C can be sold immediately. The following
information relates to October:
B: 75,000 pounds completed; 70,000 pounds sold for $7.50 per pound.
C: 50,000 pounds completed; 46,000 pounds sold for $5.00 per pound.
There were no October 1st inventories.
Required:
a. Allocate the joint process costs to Products A, B, and C assuming the estimated net
realizable value method is used.
b. Allocate the joint process costs to products A, B, and C assuming the physical quantities
method is used.
11-40
100. Albertville Corp has three operating departments (Fabricating, Assembly, and Finishing)
and two service departments (Custodial and Administrative). The following information has
been provided:
Required:
Albertville has been approached by ServiceMaster to outsource the custodial service.
Assuming all costs are variable, what is the relevant cost of the custodial department to
compare with the ServiceMaster bid?
11-41
101. The Scottso Corporation produces two consumer products and a by-product. Zylon is
ready for sale after split-off, while Qytol must be further processed. The by-product is a heavy
residue in the bottom of the vat. The net realizable value of the by-product is credited against
the $565,000 joint cost of the Heating Department. Volume and cost data for February is as
follows:
Required:
a. Allocate the Heating Department cost to the products using the physical quantities method.
b. Allocate the Heating Department cost to the products using the workback method.
102. Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned
tomatoes. During the summer, the joint costs of processing the tomatoes were $420,000.
There was no beginning or ending inventories for the summer. Production and sales value
information for the summer were as follows:
Required:
a. Determine the amount allocated to each product if the estimated net realizable value
method is used.
b. Determine the amount allocated to each product if the physical units method is used.
11-42
103. Smalltown Hospital is a small hospital with two service departments and two revenue
areas:
The hospital wants to allocate the service department costs to the revenue areas.
Housekeeping is allocated based on square footage; Laundry is allocated based on pounds of
laundry. The normal capacity for Surgery is 200 hours per month; normal capacity for
semiprivate rooms is 600 patient days; and normal capacity for maternity is 200 patient days.
Required:
Determine the overhead rate for the three revenue area. Allocate the service department costs
to the revenue areas using the direct method.
11-43
areas:
Required:
Determine the overhead rate for the three revenue areas. Allocate the service department costs
to the revenue areas using the step method. Allocate the service department with the largest
dollar value first.
11-44
areas:
Required:
to the revenue areas using the reciprocal method.
106. Describe the difference between the direct method of service department allocation, the
step method and the reciprocal method.
11-45
107. Why does the sequence in which service departments are allocated make a difference
when using the step method but not when using the reciprocal method?
108. Which of the three service department allocation methods should be used for decision
making? Explain your reasoning.
109. Explain the difference between the net realizable value method for joint cost allocation
and the netback (or workback) method.
110. Describe two methods of accounting for by-products. What effects do these methods
have on the allocation of the joint cost to the main products?
11-46
Chapter 11 Service Department and Joint Cost Allocation Answer Key
True / False Questions
1. The human resource department in a manufacturing company would be considered a

service department.
TRUE
Human resources would not be involved with manufacturing itself.
AACSB: Analytic
AICPA: FN-Measurement
Bloom's: Comprehension
Difficulty: Easy
Learning Objective: 1
Topic Area: Service Department Cost Allocation
2. One reason to allocate service department costs to user departments is to encourage the user
departments to monitor their use of the service department costs.
TRUE
Allocating encourages users to monitor their use by providing at least some information.
AACSB: Analytic
Difficulty: Medium
11-47
3. The direct method makes no cost allocations between or among service departments.
TRUE
All costs are allocated directly to the producing departments.
AACSB: Analytic
Difficulty: Easy
Topic Area: Direct Method
4. The selection of an allocation base in the direct method is easier than the selection of an
FALSE
The selection process is the same for both methods.
AACSB: Analytic
Difficulty: Medium
5. The step method allocates some, but not all, service department costs to other service
departments.
TRUE
Once a service department has been allocated, costs are not allocated back to it.
AACSB: Analytic
Difficulty: Medium
Topic Area: Step Method
11-48
6. One advantage of the step method is that all reciprocal services are recognized between
service departments.
FALSE
Only half of the reciprocal services are recognized.
AACSB: Analytic
Difficulty: Easy
7. With the reciprocal method, the total service department costs less the direct costs of the
service department equals the cost allocated to the service department.
TRUE
Direct costs + costs allocated from other services = total cost.
AACSB: Analytic
Bloom's: Application
Difficulty: Medium
Topic Area: Reciprocal Method
8. One potential disadvantage of the reciprocal method is it could overstate the cost of running
the organization's service departments.
FALSE
The reciprocal method is the most accurate method.
AACSB: Analytic
Difficulty: Medium
11-49
9. In deciding whether to outsource a service department or not, the cost of the service
department should be estimated using the step method of allocation.
FALSE
The reciprocal method should be used.
AACSB: Analytic
AICPA: FN-Decision Making
Difficulty: Medium
Topic Area: The Reciprocal Method and Decision Making
10. Joint products are outputs from common inputs and a common production process.
TRUE
This is the definition of joint products.
AACSB: Analytic
Difficulty: Easy
Topic Area: Allocation of Joint Costs
11. Joint costs are processing costs incurred after the split-off point in a common production
process.
FALSE
They are the processing costs incurred prior to the split-off point.
AACSB: Analytic
Difficulty: Easy
Topic Area: Allocation of Joint Costs
11-50
12. The estimated net realizable value for a product is its estimated selling price after
FALSE
This is the net realizable value. The estimated net realizable value is used when the products
are processed further and is the ending sales value - additional processing costs.
AACSB: Analytic
Difficulty: Medium
Topic Area: Net Realizable Value Method
13. In general, it is better to use a product's market value at the split-off point than its
estimated net realizable value in allocating joint costs.
TRUE
Actual market value is better than an estimate.
AACSB: Analytic
Difficulty: Medium
14. The estimated net realizable value at the split-off point is calculated by taking the sales
TRUE
This is the definition of estimated net realizable value.
AACSB: Analytic
Difficulty: Easy
11-51
15. If a company's two joint products can be sold at the split-off point, there is no reason for
allocating the joint costs to the products.
FALSE
Just because they can be sold doesn't mean that they are. Inventory valuation would still be
necessary.
AACSB: Analytic
Difficulty: Medium
16. The physical quantities method of allocating joint costs is often used when the output
sales prices are highly volatile.
TRUE
In this instance there would not be reliable sales values; physical values would be preferred.
AACSB: Analytic
Difficulty: Easy
Topic Area: Physical Quantities Method
17. The physical quantities method allocates joint costs so that each joint product has the
same gross margin as a percentage of sales.
FALSE
Each product has the same cost per pound (or foot, or gallon, etc).
AACSB: Analytic
Difficulty: Medium
11-52
18. In a sell-or-process-further decision, the additional costs incurred after the split-off point
are irrelevant.
FALSE
These additional costs are incremental and would be relevant.
AACSB: Analytic
Difficulty: Easy
Topic Area: Deciding Whether to Sell Goods Now or Process Them Further
19. In a sell-or-process-further decision, the common costs incurred prior to the spilt-off point
are irrelevant.
TRUE
They will be there whatever the end decision is.
AACSB: Analytic
Difficulty: Medium
20. Since by-products have minor sales value, alternative methods of accounting for them will
not have a material effect on the financial statements.
TRUE
The sales value is immaterial, so the alternate results would be immaterial.
AACSB: Analytic
Difficulty: Easy
Topic Area: Deciding What to Do with By-Products
11-53
Multiple Choice Questions
21. Which of the following is the least practical reason for allocating service department costs
to user departments?
A. To ascertain profitability of user departments.
B. To evaluate performance of managers and divisions.
C. To make user departments aware that services are costly.
D. To provide the best possible service to users.
Allocations of services does not provide incentives for service levels.
AACSB: Analytic
Difficulty: Easy
22. Service department costs are

A. generally treated as period costs rather than product costs.
B. reported as selling and administrative expenses on the income statement.
C. eventually applied by the user departments to the units produced.
D. seldom found in manufacturing organizations.
Service department costs are considered product costs since they are part of the production
process
AACSB: Analytic
Difficulty: Medium
11-54
23. A management purpose for allocating joint costs of a processing center to the various
products produced is to
A. establish inventory values for unsold units.
B. record accurate cost of sales by product line.
C. compute total processing cost variances by product.
D. report correct standard product costs for comparative analysis.
Service department costs are considered product costs since they are part of the production
process
AACSB: Analytic
Difficulty: Easy
24. Which of the following service departments could logically use space occupied (square
footage) to allocate its costs to user departments?
A. Material Handling
B. Cafeteria
C. Custodial Services
D. Cost Accounting
E. Engineering
Custodial services cleans space, so space occupied would be logical
AACSB: Analytic
Difficulty: Medium
11-55
25. Which of the following departments is not a service department in a typical manufacturing
company?
A. Assembly
B. Accounting
C. Human resources
D. Information processing
Assembly is a producing department, not a service department.
AACSB: Analytic
Difficulty: Medium
26. Criteria for selecting allocation bases for service department allocations should not
include
A. direct, traceable benefits from the service.
B. the extent of facilities provided.
C. the ease of making an allocation.
D. sales dollars generated during the period.
Revenues are never a good base for allocating service costs
AACSB: Analytic
Difficulty: Medium
Topic Area: Allocation Bases
11-56
27. Which of the following statements is (are) false regarding the direct method of allocating
service department costs?
(A) The selection of an allocation base in the direct method is easier than the selection of an
(B) Once an allocation is made from a service department using the direct method, no further
allocations are made back to that department.
A. Only A is false.
B. Only B is false.
C. Neither A nor B is false.
D. Both A and B are false.
The selection of a base is no easier for the direct method than it is for the step method
AACSB: Analytic
Difficulty: Easy
28. Which of the following methods provides no data for service departments to monitor each
other's costs?
A. Direct method.
B. Reciprocal method.
C. Step method.
D. All three methods, Direct, Reciprocal, and Step, provide data for monitoring costs.
No reciprocal services are recognized.
AACSB: Analytic
Difficulty: Easy
11-57
29. If two service departments service the same number of departments, which service
department's costs should be allocated first when using the step method?
A. The service department that provides the most service to other service departments.
B. The service department that provides the most service to the user departments.
C. The service department with the least cost.
D. The service department that provides the least service to other service departments.
E. The service department that provides the least service to the user departments.
This will minimize the percentage of services ignored in the allocation process.
AACSB: Analytic
Difficulty: Medium
30. Which of the following is a weakness of the step method of service cost allocations?
A. Computations are more complex than the reciprocal method.
B. All interdepartmental services are ignored.
C. All intradepartmental services are ignored.
D. The order of service department allocation has to be determined.
Computations are easier than the reciprocal and some services are ignored
AACSB: Analytic
Difficulty: Medium
11-58
31. LaCrescent University has 20 departments. Two of its best departments are the (1)
College of UBW (Underwater Basket Weaving) and (2) Testing Services. The College of
UBW attempts to teach students the difficult, but useful, skill of weaving baskets underwater.
Testing Services grades examinations for professors. How would these two departments be
classified?
A. a
B. b
C. c
D. d
UBW interacts directly with the consumer, while testing serves producing departments, not
consumers.
AACSB: Analytic
Difficulty: Easy
32. Joint products and byproducts are produced simultaneously by a single process or series of
processes and
A. joint products are salable at the split-off point, but byproducts are not.
B. byproducts are salable at the split-off point, but joint products are not.
C. the revenue from byproducts may be recognized at the time of production.
D. all byproducts must be allocated some portion of joint costs.
By-products can be recognized either at time of production or time of sale.
AACSB: Analytic
Difficulty: Medium
11-59
33. Which of the following best describes the objective of joint cost allocation?
A. Inventory valuation.
B. Pricing goods for sale.
C. Making decisions about levels of production.
D. Making decisions about raw materials requirements.
Joint cost allocations generally do not provide good decision making support.
AACSB: Analytic
Difficulty: Medium
Topic Area: Reasons for Allocating Joint Costs
34. Allocated joint costs are useful for

A. setting the selling price of a product.
B. determining whether to continue producing an item.
C. controlling user department costs.
D. evaluating management by means of a responsibility reporting system.
E. determining inventory cost for accounting purposes.
Joint cost allocations generally do not provide good decision making support.
AACSB: Analytic
Difficulty: Medium
Topic Area: Reasons for Allocating Joint Costs
11-60
35. Which of the following cost items is not allocable as joint costs when a single
manufacturing process produces several main products and several by-products?
A. Direct materials
B. Variable overhead
C. Direct labor
D. Fixed overhead
E. Freight-out
Freight-out would occur after the split-off point and would be a separable cost, not a joint
cost.
AACSB: Analytic
Difficulty: Easy
Topic Area: Joint Costing Defined
36. For purposes of allocating joint costs to joint products, the estimated net realizable value
at split-off is equal to
A. final sales price reduced by cost to complete after split-off.
B. sales price less a normal profit margin at the point of sale.
C. separable product cost plus a normal profit margin.
D. total sales value less joint costs at point of split-off.
This is the definition of estimated net realizable value.
AACSB: Analytic
Difficulty: Easy
11-61
37. The method of accounting for joint product costs that will produce the same gross margin
percentage for all products is the
A. replacement method.
B. physical quantities method.
C. net realizable value method.
D. units produced method.
Under net realizable value the cost allocated is a constant percentage of the sales value so
each product will have the same gross margin percentage.
AACSB: Analytic
Difficulty: Easy
38. Which of the following statements is false?

A. The estimated net realizable value for a product is its estimated selling price after
B. In general, it is better to use a product's market value at the split-off point than its estimated
net realizable value.
C. The estimated net realizable value at the split-off point is calculated by taking the sales
D. It is better to use the net realizable value method for allocating joint costs than the
estimated net realizable value method.
It is the final selling price minus the additional processing costs.
AACSB: Analytic
Difficulty: Medium
11-62
39. Net realizable value at the split-off point is used to allocate
A. a
B. b
C. c
D. d
The net realizable value method is used for joint costs.
AACSB: Analytic
Difficulty: Medium
40. Which of the following is not a physical measure that can be used for allocating joint costs
using the physical quantities method?
A. Tons of steel
B. Ounces of gold
C. Dollars of labor
D. Feet of lumber
Dollars of labor is not a physical measurement, it is a value measurement.
AACSB: Analytic
Difficulty: Easy
11-63
41. 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.
AACSB: Analytic
Difficulty: Medium
42. The characteristic that is most often used to distinguish a product as either a main product
or a by-product is the amount of
A. sales value of the products produced during the common production process.
B. direct manufacturing costs (e.g., materials) incurred before the split-off point.
C. physical measures in the products produced during the common production process.
D. time (i.e., labor) required to produce the products from start to finish.
A by-product has minimal value relative to the main products.
AACSB: Analytic
Difficulty: Easy
11-64
43. Products with a relatively minor sales value are called

A. scrap.
B. spoilage.
C. by-products.
D. main products.
This is the definition of by-product.
AACSB: Analytic
Difficulty: Easy
44. Bagley Company has two service departments and two producing departments. Square
footage of space occupied by each department follows:
The department costs of Custodial Services are allocated on a basis of square footage of
space. If Custodial Services costs are budgeted at $38,000, the amount of cost allocated to
General Administration under the direct method would be
A. $0.
B. $7,125.
C. $6,000.
D. $5,700.
$0. There are no allocations between service departments when using the direct method.
AACSB: Analytic
Difficulty: Medium
11-65
45. Castle Company has two service departments and two producing departments. The
number of employees in each department is
The department costs of the Personnel Department are allocated on a basis of the number of
allocated to Department B under the direct method would be
A. $0.
B. $17,187.50.
C. $16,875.00.
D. $18,021.84.
[250/(265 + 250)]  $37,125 = $18,021.84
AACSB: Analytic
Difficulty: Easy
11-66
Cincinnati Million, Inc. operates two user divisions as separate cost objects. To determine the
costs of each division, the company allocates common costs to the divisions. During the past
month, the following common costs were incurred:
The following information is available concerning various activity measures and service
usages by each of the divisions:
46. If common computer service costs are allocated using computer time as the allocation
basis, what is the computer cost allocated to Division B?
A. $136,190
B. $137,647
C. $144,444
D. $173,333
[$260,000  (220/420)] = $136,190
AACSB: Analytic
Difficulty: Easy
11-67
47. Using the most appropriate allocation basis, what is the personnel cost allocated to
Division A?
A. $58,143
B. $74,643
C. $76,463
D. $110,000
[$110,000  ($380,000/560,000)] = $74,643
AACSB: Analytic
Difficulty: Easy
48. If all common costs are allocated using operating profit as the allocation basis, what is the
total cost allocated to Division B?
A. $457,286
B. $512,714
C. $555,000
D. $1,087,576
$970,000  ($495,000/1,050,000) = $457,286
AACSB: Analytic
Difficulty: Medium
11-68
49. Castle Company has two service departments and two user departments. The number of
employees in each department is
The fixed costs of the Personnel Department are allocated on a basis of the number of
allocated to the Cafeteria under the step method would be
A. $0.
B. $1,718.75.
C. $1,687.50.
D. $1,802.18.
[25/(25 + 265 + 250)]  $37,125 = $1,718.75
AACSB: Analytic
Difficulty: Medium
The Emery Construction Company occupies 85,000 square feet for construction of mobile
homes. There are two manufacturing departments, finishing and assembly, and four service
departments labeled S1, S2, S3 and S4. Information relevant to Emery is as follows:
Rent paid for the area used is $720,000
11-69
50. How much rent is allocable to the assembly department using the direct method of
allocation?
A. $420,000
B. $332,500
C. $300,000
D. $252,000
[29,750/(21,250 + 29,750)]  $720,000 = $420,000
AACSB: Analytic
Difficulty: Medium
51. How much rent would be charged to S4 using the step method of allocation and a S3-S4-
S1-S2 sequence for the allocations?
A. $36,000
B. $40,000
C. $54,000
D. $90,000
(4,250/76,500)  $720,000 = $40,000
AACSB: Analytic
Difficulty: Medium
11-70
Computer Complex, Inc. has two main services: (1) time on a timeshared computer system,
and (2) proprietary computer programs. Computer time is provided by the operation
department (Op) and programs are written by the programming department (P)
The percentage of each service used by each department for a typical period is:
In a typical period, the operation department (Op) spends $4,500 and the programming
department (P) spends $2,500.
52. Under the step method (Op first), what is the cost of the computer time and the computer
programs for sale?
A. a
B. b
C. c
D. d
E. e
Time = .70 ($4,500) = $3,150; Programs = $2,500 + .30($4,500) = $3,850
AACSB: Analytic
Difficulty: Hard
11-71
53. Under the reciprocal method what is the algebraic solution to the cost allocation problem?
A. Op = 4,500 + .40 P; P = 2,500 + .30 Op.
B. Op = 4,500 + .70 P; P = 2,500 + .60 Op.
C. Op = 2,500 + .40 P; P = 4,500 + .30 Op.
D. Op = 2,500 + .70 P; P = 4,500 + .60 Op.
Op direct cost is $4,500 and uses 40% of P
AACSB: Analytic
Difficulty: Medium
The RAH Manufacturing Company has two service departments: Maintenance and
Accounting. The Maintenance Department's costs of $300,000 are allocated on the basis of
machine hours. The Accounting Department's costs of $120,000 are allocated on the basis of
the number of employees within a specific department. The direct departmental costs for A
and B are $300,000 and $500,000, respectively.
54. What is the Maintenance Department's cost allocated to Department A using the direct
method?
A. $92,000
B. $230,000
C. $276,000
D. $386,400
[$300,000/(2,300 + 200)]  2,300 = $276,000
AACSB: Analytic
Difficulty: Medium
11-72
55. What is the Accounting Department's cost allocated to Department B using the direct
method?
A. $40,000
B. $80,000
C. $20,000
D. $10,000
[$120,000/(8 + 4)]  4 = $40,000
AACSB: Analytic
Difficulty: Medium
56. What is the Maintenance Department's cost allocated to Department B using the step
method and assuming the Maintenance Department's costs are allocated first?
A. $276,000
B. $230,000
C. $322,000
D. $23,810
[200/(20 + 2,300 + 200)]  $300,000 = $23,809.52, round to $23,810.
AACSB: Analytic
Difficulty: Hard
11-73
57. What is the cost of the Accounting Department's cost allocated to Department A using the
stefp method and assuming the Maintenance Department's costs are allocated first?
A. $81,333
B. $81,587
C. $80,000
D. $68,571
($300,000/2,520)  20 = $2,381
[($120,000 + 2,381)/(8 + 4)]  8 = $81,587
AACSB: Analytic
Difficulty: Medium
11-74
Harry Dishman owns and operates Harry's Septic Service and Legal Advice. Harry's two
revenue generating (production) operations are supported by two service departments:
Clerical and Janitorial. Costs in the service departments are allocated in the following order
using the designated allocation bases:
Clerical:
Variable cost: expected number of work orders processed
Fixed cost: long-run average number of work orders processed
Janitorial:
Variable cost: labor hours
Fixed cost: square footage of space occupied
Average and expected activity levels for next month (June) are as follows:
Expected costs in the service departments for June are as follows:
11-75
58. Under the step method of allocation, how much Clerical service cost should be allocated
to the Septic Service operation for June? (Assume Clerical costs are allocated before Janitorial
costs and round all calculations to the nearest whole dollar.)
A. $12,689
B. $13,100
C. $13,620
D. $15,596
E. $16,070
[(50/80)  $12,000] + [(80/120)  $8,400] = $13,100
AACSB: Analytic
Difficulty: Hard
59. Under the direct method of allocation, what is the total amount of service cost allocated to
the Legal Advice operation for June? (Round all calculations to the nearest whole dollar.)
A. $6,231
B. $7,720
C. $8,640
D. $9,330
E. $9,804
[(25/75)  $12,000] + [(20/100)  $8,400] + [(840/1400)  $4,200] + [(2200/4000)  $800] =

$8,640
AACSB: Analytic
Difficulty: Medium
11-76
The following information relates to Ray Corporation for the past accounting period.
60. Using the simultaneous solution method, department A's cost allocated to department C is
A. $48,000
B. $58,800
C. $60,619
D. $98,000
A = $80,000 + .30B; B = $60,000 + .10A

A = $101,031; B = $70,103
C's portion of A = .60  $101,031 = $60,619
AACSB: Analytic
Difficulty: Hard
11-77
61. Using the simultaneous solution method, department B's cost allocated to department C is
A. $29,021
B. $14,021
C. $13,192
D. $7,794
A = $80,000 + .30B; B = $60,000 + .10A

A = $101,031; B = $70,103
C's portion of A = .20  $70,103 = $14,021
AACSB: Analytic
Difficulty: Hard
The following set up is a system of simultaneous linear equations to allocate costs using
reciprocal method. Matrix algebra is not required.
The following costs were incurred in three operating departments and three service
departments in Reality Company.
Use of services by other departments is as follows.
11-78
62. The equation for department P1 (subassemblies) is

A. P1 = $550,000 + .25P2 + .20P3 + .15S2 + 10S3.
B. P1 = $550,000 + .30S1 + .50S2 + .20S3.
C. P1 = .30S1 + .50S2 + 20S3.
D. P1 = .30S1 + .50S.
The direct cost for subassemblies is $550,000 and it uses 50% of R&D.
AACSB: Analytic
Difficulty: Medium
63. The equation for department P2 (final assembly) is

A. P2 = .25S1 + .50S2 + .30S3.
B. P2 = $775,000 + .25P2 + .20P3 + .15S2 + .10S3.
C. P2 = $775,000 + .30S1 + .50S2 + .20S3.
D. P2 = $775,000 + .25S1 + .50S2 + .30S3.
The direct cost for final assembly is $775,000 and it uses 25% of bldg occupancy and 50% of
R&D.
AACSB: Analytic
Difficulty: Medium
11-79
64. The equation for department P3 (marketing) is

A. P3 = $285,000 + .20S1 + .20S3.
B. P3 = $285,000 + .20S1 + .60S2 + .20S3.
C. P3 = $285,000 + .20S1 + .20S2 + .60S3.
D. P3 = $285,000 + .50S1 + .50S3.
There is no R&D usage by marketing; 20% of bldg occupancy is used.
AACSB: Analytic
Difficulty: Medium
65. The equation for department S1 (building occupancy) is

A. S1 = .10S3.
B. S1 = $85,000 + 1.00S3.
C. S1 = $85,000 + .10S3.
D. S1 = $85,000 + .90S2 + .10S3.
Bldg occupancy has direct costs of $85,000 and only uses supervision
AACSB: Analytic
Difficulty: Medium
11-80
66. The equation for department S2 (research and development) is

A. S2 = $120,000 + .15S1 + .65S2 + .20S3.
B. S2 = .15S1 + 20S3.
C. S2 = $120,000 + .15S1 + .20S3.
D. S2 = $120,000 + .40S1 + .60S3.
R&D has direct cost of $120,000 and uses 15% of bldg occupancy and 20% of supervision
AACSB: Analytic
Difficulty: Medium
67. The equation for department S3 (supervision) is

A. S3 = $45,000 + .90S1 + .10S2.
B. S3 = $45,000 + .10S1.
C. S3 = $45,000 + 1.00S1.
D. S3 = .10S1.
Supervision has $45,000 in direct costs and 10% of bldg occupancy
AACSB: Analytic
Difficulty: Medium
11-81
68. Products X, Y, and Z are produced from the same process at a cost of $5,200. Five
thousand pounds of raw material yields 1,500 X, 2,500 Y, and 1,000 Z. Selling prices are: X
$2 per unit, Y $4 per unit, Z valueless. The ending inventory of X is 50 units. What is the
value of the ending inventory if joint costs are allocated using net realizable value?
A. $21.67.
B. $31.20.
C. $40.00.
D. $42.00.
[(1,500  $2)/($3,000 + 10,000)]  $5,200 = $1,200; ($1,200/1,500)  50 = $40.00
AACSB: Analytic
Difficulty: Medium
11-82
69. Lite Co. manufactures products X and Y from a joint process that also yields a by-product,
Z. Revenue from sales of Z is treated as a reduction of joint costs. Additional information is as
follows:
Joint costs were allocated using the net realizable value method at split-off approach. The
joint costs allocated to product X were
A. $75,000.
B. $100,800.
C. $150,000.
D. $168,000.
($300,000/450,000)  ($262,000 - 10,000) = $168,000
AACSB: Analytic
Difficulty: Medium
11-83
70. Great Falls Company makes two products, G and H. They are initially processed from the
same raw material and then, after split-off, further processed separately. Additional
information is as follows:
What are the joint costs allocated to products G and H assuming Great Falls uses the
estimated net realizable value approach?
A. a
B. b
C. c
D. d
G: [($9,000 - 3,000)/($6,000 + 3,000)]  $6,600 = $4,400

H: [($6,000 - 3,000)/($6,000 + 3,000)]  $6,600 = $2,200
AACSB: Analytic
Difficulty: Medium
11-84
Vreeland, Inc., manufactures products X, Y, and Z from a common process. Joint costs were
$60,000. Additional information is as follows:
71. Assuming that joint production costs are allocated using the physical quantities method
(units produced), what were the costs allocated to Product X?
A. $27,000.
B. $29,000.
C. $33,000.
D. $30,000.
(6,000/12,000)  $60,000 = $30,000
AACSB: Analytic
Difficulty: Medium
11-85
72. Assuming that joint product costs are allocated using the net realizable value method,
what were the total costs assigned to Product Y?
A. $26,000.
B. $26,796.
C. $27,000.
D. $28,286.
$6,000 + [($35,000/100,000)  $60,000] = $27,000
AACSB: Analytic
Difficulty: Medium
73. Raymer Corporation produced 3,660 units, consisting of three separate products, in a joint
process for the year. The market for these products was so unstable that it was not practical to
estimate the selling price of the products. A cost of $425,000 was incurred in the joint
process. Product X's production was 80% of product Y's while product Z's production was
125% of product Y's. What is the amount of the joint cost allocable to product X assuming
Raymer uses the physical quantities method of allocation?
A. $111,475
B. $114,865
C. $139,344
D. $141,667
X = .8Y; Z = 1.25Y; Y + .8Y + 1.25Y = 3,660 units; Y = 1,200, X = 960, Z = 1,500

960/3660  $425,000 = $111,475
AACSB: Analytic
Difficulty: Medium
11-86
74. Zebra Manufacturing Company incurred a joint cost of $600,000 in the production of R
and S in a joint process. Presently, 1,800 of R and 1,400 of S are being produced each month.
Management plans to decrease R's production by 300 units in order to increase the production
of S by 500 units. Additionally, this change will require minor modifications, which will add
$20,000 to the joint cost. This cost is entirely attributable to product S. What is the amount of
the joint costs allocable to R and S before changes to existing production assuming Zebra
allocates their joint costs according to the proportion of S and R produced?
A. a
B. b
C. c
D. d
R: (1,800/3,200)  $600,000 = $337,500; S: (1,400/3,200)  $600,000 = $262,500
AACSB: Analytic
Difficulty: Medium
11-87
75. Lankip Company produces two main products and a by-product out of a joint process. The
ratio of output quantities to input quantities of direct material used in the joint process remains
consistent from month to month. Lankip has employed the physical-volume method to
allocate joint production costs to the two main products. The net realizable value of the by-
product is used to reduce the joint production costs before the joint costs are allocated to the
main products. Data regarding Lankip's operations for the current month are presented in the
chart below. During the month, Lankip incurred joint production costs of $2,520,000. The
main products are not marketable at the split-off point and, thus, have to be processed further.
The amount of joint production cost that Lankip would allocate to the Second Main Product
by using the physical quantities method to allocate joint production costs would be
A. $1,200,000
B. $1,260,000
C. $1,500,000
D. $1,575,000
$2,520,000 - ($2  60,000) = $2,400,000; (150,000/240,000)  $2,400,000 = $1,500,000
AACSB: Analytic
Difficulty: Medium
11-88
The Moody Company produced three joint products at a joint cost of $100,000. Two of these
products were processed further. Production and sales were:
76. If the estimated net realizable value method is used and product Q is accounted for as a
main product, how much of the joint costs would be allocated to product R?
A. $38,889
B. $41,667
C. $50,000
D. $62,500
[($175,000 - 100,000)/($75,000 + 30,000 + 45,000)]  $100,000 = $50,000
AACSB: Analytic
Difficulty: Hard
77. Assume Q is a by-product and Moody uses the cost reduction method of accounting for
by-product cost. If estimated net realizable value is used, how much of the joint costs would
be allocated to product R?
A. $38,889
B. $43,750
C. $50,000
D. $62,500
[($175,000 - 100,000)/($75,000 + 45,000)]  ($100,000 - 30,000) = $43,750
AACSB: Analytic
Difficulty: Hard
11-89
78. If joint costs are allocated based on relative weight of the outputs and all products are
main products, how much of the joint costs would be allocated to product P?
A. $43,750
B. $50,000
C. $60,000
D. $62,500
[300,000/(300,000 + 100,000 + 100,000)]  $100,000 = $60,000
AACSB: Analytic
Difficulty: Easy
79. What is the net income of Moody Company if the estimated net realizable value method
of joint cost allocation is used?
A. $20,000
B. $50,000
C. $150,000
D. $350,000
$450,000 - $300,000 - $100,000 = $50,000
AACSB: Analytic
Difficulty: Medium
11-90
80. Anchorage Company manufactures three main products, L, M and N, from a joint process.
Additional information for June production activity follows:
Assuming that the 10,000 units of N were processed further and sold for $78,000 what was
Anchorage's gross profit from this sale? Assume the physical quantities method of allocation
is used.
A. $21,000
B. $28,500
C. $30,000
D. $66,000
[10,000/(50,000 + 40,000 + 10,000)]  $450,000 = $45,000

$78,000 - ($45,000 + 12,000) = $21,000
AACSB: Analytic
Difficulty: Medium
11-91
81. The Freed Company produces three products, X, Y, and Z from a single raw material
input. Product Y can be sold at the split-off point for total revenues of $50,000 or it can be
processed further at a total cost of $16,000 and then sold for $68,000. Product Y
A. should be sold at the split-off point, rather than processed further.
B. would increase the company's overall net income by $18,000 if processed further and then
sold.
C. would increase the company's overall net income by $68,000 if processed further and then
sold.
D. would increase the company's overall net income by $2,000 if processed further and then
sold.
Process further: $68,000 - 16,000 = $52,000 vs $50,000 sell now
AACSB: Analytic
Bloom's: Analysis
Difficulty: Medium
82. There are several methods for allocating service department costs to production
departments. The method which recognizes service provided by one service department to
another but does not recognize reciprocal interdepartmental service is called: (CMA adapted)
A. direct method.
B. variable method.
C. linear method.
Step-down is another term for step method
AACSB: Analytic
Difficulty: Easy
11-92
83. Because this allocation method recognizes that service departments often provide each
other with inter-departmental service, it is theoretically considered to be the most accurate
method for allocating service department costs to production departments. This method is:
(CMA adapted)
A. direct method.
B. variable method.
C. linear method.
Reciprocal is considered most accurate because it includes all reciprocal services.
AACSB: Analytic
Difficulty: Easy
84. For the purposes of allocating joint costs to joint products, the sales price at the point of
sale, reduced by the cost to complete after split-off, is assumed to be equal to the (CPA
adapted)
A. total costs.
B. joint costs.
C. sales price less a normal profit margin at point of sale.
D. relative sales value at split-off.
This is an estimate of the sales value at split-off.
AACSB: Analytic
Difficulty: Easy
11-93
85. In joint product costing and analysis, which one of the following costs is relevant when
deciding the point at which a product should be sold in order to maximize profits? (CMA
adapted)
A. separable costs after the split-off point
B. joint costs to the spilt-off point
C. sales salaries for the period when the units were produced
D. purchase costs of the materials required for the joint products
E. the company president's salary
b & d are joint costs and are irrelevant; c & e are period costs and are also irrelevant.
AACSB: Analytic
Difficulty: Easy
11-94
Essay Questions
Required:
Allocate the service department costs to the user departments using the direct method. (Round
to the nearest dollar and provide total user department costs)
Computer programming $101,710; Consulting: $129,871; Training: $113,419
Feedback:
11-95
AACSB: Analytic
Difficulty: Easy
Required:
Allocate the service department costs to the user departments using the step method. Allocate
Information Systems first and round to the nearest dollar. Provide total user department costs.
11-96
Computer Programming: $100,370; Consulting: $130,556; Training: $114,074
Feedback:
AACSB: Analytic
Difficulty: Medium
11-97
Required:
Allocate the service department costs to the user departments using the reciprocal method.
Round to the nearest dollar.
11-98
Computer Programming: $100,929; Consulting: $130,270; Training: $113,800
Feedback: IS = $50,000 + [(200/2,000)  Fac]

Fac = $25,000 + [(400/3,000)x IS]
IS = $53,209; Fac = $32,095
AACSB: Analytic
Difficulty: Hard
11-99
further in Department #3. Product H is a byproduct, to be accounted for by the cost reduction
Products A, K, and H assuming Darl uses the estimated net realizable value method to
allocate joint costs to the main products.
Feedback: Joint costs: $420,000 - [(10,000  $1.50) - (10,000  $0.30)] = $409,500

Allocated costs: A: [$150,000/(150,000 + 502,500)]  $409,500 = $94,138; B:
[$502,500/(150,000 + 502,500)]  $409,500 = $315,262
AACSB: Analytic
Difficulty: Medium
11-100
further in Department #3. Product H is a byproduct, to be accounted for by the other revenue
Products A, K, and H assuming Darl uses the physical quantities method to allocate joint costs
to the main products.
Feedback: Joint costs: $420,000 - 0 = $420,000

Allocated costs: A: [25,000/(25,000 + 75,000)]  $420,000 = $105,000;
K: [75,000/(20,00 + 75,000)]  $420,000 = $315,000
AACSB: Analytic
Difficulty: Medium
11-101
91. The McClean Manufacturing Company started the production of K1 (its main product)
and S2 (its byproduct) on January 2, 2010. During 2010, 7,500 units of K1 and 1,500 units of
S2 were produced. In 2010, 6,000 units of K1 and 1,000 units of S2 were sold at $57.00 and
$1.10 per unit, respectively. Production was halted at the end of 2010 and the inventory was
sold in 2011 at the normal selling prices. The joint production costs were $240,000 and are
entirely avoidable. The separable costs to produce K1 were $2.60 per unit and to produce S2
were $.45 per unit. Operating expenses were $60,000 in 2010 and $12,000 in 2011.
Required:
a. Prepare an income statement for 2010 and 2011 assuming the "other revenue" method of
b. Prepare an income statement for 2010 and 2011, assuming the "cost reduction" method of
AACSB: Analytic
Bloom's: Analysis
Difficulty: Hard
11-102
92. Canadian Mills, Inc. operates a sawmill facility. The company accounts for the sawdust
that result from the primary sawing operation as a by-product. The sawdust is sold to another
company at a price of $1.00 per hundred cubic feet. Normally, sales revenue from the sawdust
is $21,200 per month. The sawdust is charged to inventory at $2.20 per hundred cubic feet,
although there is no direct cost to process it.
As an alternative, the company can rent equipment that will process the dust into imitation
logs for fireplaces. These logs sell for $25.00 per hundred to wholesalers, who package and
scent them. 75 logs can be produced from 100 cubic feet of sawdust.
Cost of the equipment to produce these logs and the additional personnel required to operate
the equipment are $360,000 per month, regardless of the output.
Required:
A) Should the company sell the sawdust for $1.00 per hundred cubic feet or process it into
imitation logs? Support your answer with the appropriate calculations.
Process them further
Feedback: Sell now at $100 per hundred = $21,200

Process further = [$25 ($21,200/$1.00)(75/100)] - $360,000 = $397,500 - 360,000 = $37,500
Decision: Process further for an incremental income of $37,500 - $21,200 = $16,300
AACSB: Analytic
Bloom's: Analysis
Difficulty: Easy
11-103
93. A manufacturing company uses a joint production process that produces three products at
the split-off point. Joint production costs during April were $720,000. The company uses the
net realizable value method for allocating joint costs. Product information for April was as
follows:
Required:
a. Assume that all three products are main products and that they can be sold at the split-off
point or processed further, whichever is economically beneficial to the company. Allocate the
joint costs to the three products.
b. Assume that the company uses the physical quantities method to allocate the joint costs.
How much would be allocated to each of the three products?
a. R: $218,182; S: $307,909; T: $130,909

b. R: $120,000; S: $240,000; T: $360,000
Feedback: a. R: Sell now: 2,500  $100 = $250,000; process further: (2,500  $150) -
$150,000 = $225,000; Sell now
S: Sell now: 5,000  $80 = $400,000; process further: (5,000  $115) - $150,000 = $425,000;
Process further
T: Sell now: 7,500  $20 = $150,000; process further: (7,500  $30) - $100,000 = $125,000;
Sell now
Joint cost allocation:
R: [$250,000/($250,000 + 425,000 + 150,000)]  $720,000 = $218,182
S: [$425,000/($250,000 + 425,000 + 150,000)]  $720,000 = $307,909
T: [$150,000/($250,000 + 425,000 + 150,000)]  $720,000 = $130,909
b. R: [2,500/(2,500 + 5,000 + 7,500)]  $720,000 = $120,000
S: [5,000/(2,500 + 5,000 + 7,500)]  $720,000 = $240,000
T: [7,500/(2,500 + 5,000 + 7,500)]  $720,000 = $360,000
AACSB: Analytic
Difficulty: Medium
Topic Area: Joint Cost Allocation Methods
11-104
94. Petro-Chem Inc. is a small company that acquires high-grade crude oil from low-volume
production wells owned by individuals and small partnerships. The crude oil is processed in a
single refinery into Two Oil, Six Oil, and impure distillates. Petro-Chem does not have the
technology or capacity to process these products further and sells most of its output each
month to major refineries. There were no inventories on November 1.
Production and sales

Two Oil, 300,000 barrels produced; 280,000 barrels sold at $20 each.
Six Oil, 240,000 barrels produced; 220,000 barrels sold at $30 each.
Distillates, 120,000 barrels produced and sold at $15 per barrel.
Required:
a. Allocate the joint costs to the products using the physical quantities method,
b. Allocate the joint costs to the products using the net realizable value method.
a. Two Oil: $4,545,455; Six Oil: $3,636,364; Distillates: $1,818,181

b. Two Oil: $4,000,000; Six Oil: $4,800,000; Distillates: $1,200,000
Feedback: Total joint cost: $5,000,00 + 2,000,000 + 3,000,000 = $10,000,000

a. Two Oil: [300,000/(300,000 + 240,000 + 120,000)]  $10,000,000 = $4,545,455
Six Oil: [240,000/(300,000 + 240,000 + 120,000)]  $10,000,000 = $3,636,364
Distillates: [120,000/(300,000 + 240,000 + 120,000)]  $10,000,000 = $1,818,181
b. Net realizable values: Two Oil: 300,000  $20 = $6,000,000; Six Oil: 240,000  $30 =
$7,200,000; Distillates: 120,000  $15 = $1,800,000; Total = $15,000,000
Two Oil: ($6,000,000/$15,000,000)  $10,000,000 = $4,000,000
Six Oil: ($7,200,000/$15,000,000)  $10,000,000 = $4,800,000
Distillates: ($1,800,000/$15,000,000)  $10,000,000 = $1,200,000
AACSB: Analytic
Bloom's: Analysis
Difficulty: Medium
11-105
Required:
Use the direct method to allocate the service department costs to the revenue generating
Abstract: $31,167; Close: $18,833
Feedback:
AACSB: Analytic
Difficulty: Medium
11-106
generating operations Abstracting Services and Closing Services are supported by two service
departments: Clerical and Custodial. Costs in the service departments are allocated in the
following order using the designated allocation bases.
Required:
a. Use the step method to allocate the service department costs to the revenue generating
departments. Assume Clerical costs are allocated before Custodial costs and round all
calculations to the nearest whole dollar. Provide the total costs for the revenue departments.
b. Use the step method to allocate the service department costs to the revenue generating
departments but now assume Custodial costs are allocated before Clerical costs. Provide the
total costs for the revenue departments.
a. Abstract: $30,625; Close: $19,375

b. Abstract: $31,785; Close: $18,215
Feedback:
11-107
AACSB: Analytic
Difficulty: Medium
Required:
Use the reciprocal method to allocate the service department costs to the revenue generating
11-108
Abstract: $31,364; Close: $18,636
Feedback: Clerical = $40,000 + (1,600/5,600  Custodial)

Custodial = $10,000 + (5/80  Clerical)
Clerical = $43,636.36; Custodial = $12,727.27
AACSB: Analytic
Difficulty: Hard
11-109
98. Daz Manufacturing Company buys Liquid Charcoal for $.80 a gallon. At the end of
processing in department 1, the liquid charcoal splits off into Products U, V, and W. Product
U is sold at the split-off point, with no further processing. Products V and W require further
processing before they can be sold; Product V is processed in Department 2, and Product W is
processed in Department 3. Following is a summary of costs and other related data for the
most recent accounting period:
There were no beginning inventories and there was no liquid charcoal on hand at the end of
the period. All gallons on hand in ending inventory were complete as to processing. Daz uses
the estimated net realizable value method of allocating joint costs.
Required:
a. Determine the product cost for U, V and W, assuming the physical quantity method is used
to allocate joint costs.
b. Determine the product cost for U, V and W, assuming the net realizable value method is
used to allocate joint costs.
a. U: $30,000; V: $35,000; W: $65,000

b. U: $30,000; V: $35,000; W: $65,000
Feedback: Joint Cost = $104,000 + 16,000 + 10,000 = $130,000

a. U: [(20,000 + 15,000)/(20,000 + 15,000 + 30,000 + 50,000 + 15,000)]  $130,000 =
$35,000
V: [30,000/(20,000 + 15,000 + 30,000 + 50,000 + 15,000)]  $130,000 = $30,000
W: [(50,000 + 15,000)/(20,000 + 15,000 + 30,000 + 50,000 + 15,000)]  $130,000 = $65,000
b. Selling Prices: U:$30,000/20,000 = $1.50; V: $96,000/30,000 = $3.20; W: $142,000/50,000
= $2.84; Net realizable values: U: (20,000 + 15,000)  $1.50 = $52,500; V: $96,000; W:
(50,000 + 15,000)  $2.84 = $184,600; Total NRV = $333,100
U: (52,500/333,100)  $130,000 = $20,489
V: (96,000/333,100)  $130,000 = $37,466
W: (184,600/333,100)  $130,000 = $72,045
11-110
AACSB: Analytic
Bloom's: Analysis
Difficulty: Medium
99. The Tworek Company conducts a simple chemical process in Department #1, which
produces three separate items: A, B, and C. A is processed further in Department #2. B is
processed further in Department #3. Product C can be sold immediately. The following
information relates to October:
B: 75,000 pounds completed; 70,000 pounds sold for $7.50 per pound.
C: 50,000 pounds completed; 46,000 pounds sold for $5.00 per pound.
There were no October 1st inventories.
Required:
a. Allocate the joint process costs to Products A, B, and C assuming the estimated net
realizable value method is used.
b. Allocate the joint process costs to products A, B, and C assuming the physical quantities
method is used.
a. A: $140,361; B: $204,693; C: $194,946

b. A: $90,000; B: $270,000; C: $180,000
Feedback: a. estimated net realizable values: A: 25,000  $12 = $300,000 - $120,000 =

$180,000; B: 75,000  $7.50 = $562,500 - $300,000 = $262,500; C: 50,000  $5 = $250,000;
Total NRV: $180,000 + 262,500 + 250,000 = $692,500
A: ($180,000/$692,500)  $540,000 = $140,361
B: ($262,500/$692,500)  $540,000 = $204,693
C: ($250,000/$692,500)  $540,000 = $194,946
b. A: [25,000/(25,000 + 75,000 + 50,000)]  $540,000 = $90,000
B: [75,000/(25,000 + 75,000 + 50,000)]  $540,000 = $270,000
C: [50,000/(25,000 + 75,000 + 50,000)]  $540,000 = $180,000
AACSB: Analytic
Bloom's: Analysis
Difficulty: Medium
11-111
100. Albertville Corp has three operating departments (Fabricating, Assembly, and Finishing)
and two service departments (Custodial and Administrative). The following information has
been provided:
Required:
Albertville has been approached by ServiceMaster to outsource the custodial service.
Assuming all costs are variable, what is the relevant cost of the custodial department to
compare with the ServiceMaster bid?
$267,606
Feedback: Custodial = $250,000 + (10/(10 + 80 + 100 + 60)  Admin)

Admin = $400,000 + (15,000/(15,000 + 30,000 + 35,000 + 20,000)  Custodial)
Custodial = $267,606
AACSB: Analytic
Bloom's: Analysis
Difficulty: Medium
11-112
101. The Scottso Corporation produces two consumer products and a by-product. Zylon is
ready for sale after split-off, while Qytol must be further processed. The by-product is a heavy
residue in the bottom of the vat. The net realizable value of the by-product is credited against
the $565,000 joint cost of the Heating Department. Volume and cost data for February is as
follows:
Required:
a. Allocate the Heating Department cost to the products using the physical quantities method.
b. Allocate the Heating Department cost to the products using the workback method.
a. Zylon: $187,500; Qytol: $375,000

b. Zylon: $281,250; Qytol: $281,250
Feedback: a. Joint costs to allocate: $565,000 - (5,000  $0.50) = $562,500

Zylon: [200,000/(200,000 + 400,000)]  $562,500 = $187,500
Qytol: [400,000/(200,000 + 400,000)]  $562,500 = $375,000
b. estimated net realizable values: Zylon: 200,000  $2 = $400,000; Qytol: (400,000  $1.10)
- 40,000 = $400,000
Zylon: [$400,000/($400,000 + 400,000)]  $562,500 = $281,250
Qytol: [$400,000/($400,000 + 400,000)]  $562,500 = $281,250
AACSB: Analytic
Bloom's: Analysis
Difficulty: Medium
11-113
102. Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned
tomatoes. During the summer, the joint costs of processing the tomatoes were $420,000.
There was no beginning or ending inventories for the summer. Production and sales value
information for the summer were as follows:
Required:
a. Determine the amount allocated to each product if the estimated net realizable value
method is used.
b. Determine the amount allocated to each product if the physical units method is used.
a. Ketchup: $150,000; Juice: $180,000; Canned: $90,000

b. Ketchup: $93,333; Juice: $140,000; Canned: $186,667
Feedback: a. Estimated net realizable value: Ketchup: 100,000  ($28 - $3) = $2,500,000;
Juice: 150,000  ($25 - $5) = $3,000,000; Canned: 200,000  ($10 - $2.50) = $1,500,000
Ketchup: [$2,500,000/($2,500,000 + 3,000,000 + 1,500,000)]  $420,000 = $150,000
Juice: [$3,000,000/($2,500,000 + 3,000,000 + 1,500,000)]  $420,000 = $180,000
Canned: [$1,500,000/($2,500,000 + 3,000,000 + 1,500,000)]  $420,000 = $90,000
b. Use number of cases for physical quantity.
Ketchup: [100,000/(100,000 + 150,000 + 200,000)]  $420,000 = $93,333
Juice: [150,000/(100,000 + 150,000 + 200,000)]  $420,000 = $140,000
Canned: [200,000/(100,000 + 150,000 + 200,000)]  $420,000 = $186,667
AACSB: Analytic
Bloom's: Analysis
Difficulty: Medium
11-114
areas:
Required:
to the revenue areas using the direct method.
Surgery: $2,510.48/hr; SemiPrivate rooms: $455.45/day; Maternity: $933.18/day
Feedback:
Surgery: $502,096/200 = $2,510.48/hr

SemiPrivate Rooms: $273,269/600 patient days = $455.45/day
Maternity: $186,635/200 patient days = $933.18/day
11-115
AACSB: Analytic
Bloom's: Analysis
Difficulty: Medium
areas:
Required:
Determine the overhead rate for the three revenue areas. Allocate the service department costs
to the revenue areas using the step method. Allocate the service department with the largest
dollar value first.
11-116
Feedback:
Surgery: $497,067/200 = $2,485.34/hr

11-117
AACSB: Analytic
Bloom's: Analysis
Difficulty: Medium
areas:
Required:
to the revenue areas using the reciprocal method.
11-118
Feedback: HK = $80,000 + 16/100  Laund

Laund = $132,000 + 500/5,000  HK
HK = $102,764; Laundry = $142,276
Surgery: $499,122/200 = $2,495.61/hr

11-119
AACSB: Analytic
Bloom's: Analysis
Difficulty: Medium
106. Describe the difference between the direct method of service department allocation, the
step method and the reciprocal method.
The direct method allocates the service department costs only to the producing or operating
departments. The step method allocates service department costs to other service departments
as well as the producing departments, but once a service department has been allocated, no
further allocations are made back to that department. The step method recognizes only some
of the services provided to a department. The reciprocal method recognizes all of the services
provided to a department.
AACSB: Analytic
Difficulty: Medium
Topic Area: Methods of Allocating Service Department Costs
107. Why does the sequence in which service departments are allocated make a difference
when using the step method but not when using the reciprocal method?
The sequence makes a difference when using the step method because once a service
department's costs have been allocated, no costs are allocated back to that department. The
departments that are among the first to be allocated will not be charged for service department
costs of departments that are later in the sequence. The sequence does not matter when using
the reciprocal method because the costs are allocated simultaneously.
AACSB: Analytic
Difficulty: Medium
Topic Area: Methods of Allocating Service Department Costs
11-120
108. Which of the three service department allocation methods should be used for decision
making? Explain your reasoning.
The only method that is appropriate to use for decision making is the reciprocal method. The
reciprocal method attempts to determine all of the costs of a service department. The step
method includes only some of the services from other service departments; the direct method
ignores all of the services from other service departments.
AACSB: Analytic
Difficulty: Medium
109. Explain the difference between the net realizable value method for joint cost allocation
and the netback (or workback) method.
The net realizable value method is used when products are salable at the split-off point. The
netback, also called workback or estimated net realizable value, method is used when some or
all of the products must be go through additional processing before they are salable. In this
case, an estimate of the net realizable value is computed by taking the final sales value minus
the additional processing costs.
AACSB: Analytic
Difficulty: Medium
11-121
110. Describe two methods of accounting for by-products. What effects do these methods
have on the allocation of the joint cost to the main products?
One method is to assign a value to the by-products equal to the net realizable value of the by-
product. This method reduces the joint cost by the amount assigned to the by-products. The
second method is to assign no value to the by-products, but to treat the proceeds of the sale of
the by-product as other revenue. In this method there is no reduction in the joint cost.
AACSB: Analytic
Difficulty: Medium
11-122
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The Project Gutenberg eBook of Book of
Detective Stories
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States and most other parts of the world at no cost and with
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eBook.
Title: Book of Detective Stories
Editor: Frank Pemmon
Release date: May 11, 2022 [eBook #68049]
Language: English
Original publication: United States: A. B. Courtney, 1894
Credits: Demian Katz, Craig Kirkwood, and the Online

Distributed Proofreading Team at https://www.pgdp.net
(Images courtesy of the Digital Library@Villanova
University.)
*** START OF THE PROJECT GUTENBERG EBOOK BOOK OF

DETECTIVE STORIES ***
Multum in Parvo
Library.
Vol. I. November, 1894. No. 11.

Published Monthly.
Book of Detective
Stories
Smallest Magazine in the World. Subscription
price, 50 cts. per year. Single copies, 5 cents
each.
PUBLISHED BY
A. B. COURTNEY,
671 Tremont Street, Boston.
DETECTIVE STORIES.
From the Diary of a New York Detective.
EDITED BY FRANK PEMMON.
Betrayed by a Dog.
Animals, especially dogs, have played an important part in the affairs
of men. There is now in Chicago a dog that has become the
companion and assistant of a policeman, and really does help his
friend to detect and ferret out thieves and other evil doers. I was
once concerned in a case in which a dog played a most important
part, and led finally, through no fault of his own, however, to the
detection of his master.
The store of John Camden had been broken into and the safe blown
open and robbed of a large sum of money. The cash had been
received that day too late to be deposited in the bank. Next morning
it was gone, and no trace of the thief was to be found. At least, Mr.
Camden and his clerks and the police officials found no trace of him.
Not so with me. I was sent to look up the affair. I found the office in a
state of confusion. The door of the safe had been blown off and the
contents lay scattered over the floor. I asked Mr. Camden if he had
disturbed anything. He said he had not, except to satisfy himself that
the money was gone.
Near by was a cat, dead, her throat cut evidently by a hatchet that
lay close at hand. This seemed to me to be the basis of a clue. Why
had the cat been killed? It is not necessary to kill cats in order to
prevent them from telling tales. I examined the unfortunate feline
more carefully. In addition to the ugly cut on the throat there were
other and more significant marks upon the back. A saucer, evidently
having recently contained milk, stood near by. Also an overturned
can from which pussy’s supply of milk had evidently been obtained.
The contents of this had been consumed. Mr. Camden informed me
that this can had been filled with milk only the previous evening.
Among the papers scattered upon the floor was one that attracted
my attention. It was a portion of a note written in French. I was aware
that Mr. Camden did not write or speak French. I questioned him
about it. He could give me no information. He had never seen it
before.
“Did any one know you had a large sum of money in the safe?” I
asked.
“Yes, a number of people knew of the fact. I had been expecting to
receive the money for the past two weeks.”
“Who are those who know you had it?”
“My wife, brother, the man I sold the property to (that is how I came
to have such a large sum at one time) and the real estate dealers
through whom I sold it.”
“Any one else?”
“Oh, yes, a friend, my daughter’s music teacher. He it was who found
me a purchaser for the property.”
“He is a Frenchman, is he not, and is invariably accompanied by his
pretty little dog?”
“Why, yes; do you know him?”
“No—never saw him. He knew you had a large sum of money in the
safe?”
“Yes; he saw me deposit it there.”
“When did he give your daughter her last music lesson?”
“Last evening, but he complained of being ill and went away earlier
than usual.”
“Did he have his dog with him?”
“Yes; he claims the dog is his only friend.”
“Have you a specimen of his handwriting at hand?”
“Yes; I have several acknowledgments of money received.”
He produced them. I compared the writing with that of the note I had
found near the safe. They were, as far as I could determine,
identically the work of the same person.
Satisfied that I was on the right track, I caused a watch to be put
upon the music teacher with the result that he was arrested as he
was about to leave the city. He made a full confession.
“How did you guess it was a Frenchman who robbed my safe, and
that he was accompanied by a pretty little dog?” inquired Mr.
Camden.
“I found the cat had been killed by a dog, and his master afterward
cut her throat with the hatchet to ward off suspicion from the dog; the
dog drank the milk which had been provided for the cat. I found a
note written in French and evidently dropped by the thief near the
safe, and his dog was a pretty little animal because his master’s
patrons, like yourself, would not tolerate the presence of any other
kind, and you told me the dog always accompanied his master.”
The Key to the Mystery.
The most puzzling case upon which I ever worked was that of the
murder of John Long. The facts are briefly these: Mr. Long, a
wealthy, retired merchant, living at the home of his nephew, failed to
answer the dinner-bell one day. He was a man who always prided
himself upon his punctuality, and his failure to appear at dinner at the
usual hour caused no little surprise. A messenger was sent to his
room to call him. No response came to repeated knocks upon his
chamber door. The door was locked. Fearful that something had
happened to him, Mr. Brant—the old gentleman’s nephew—set
about breaking down the door. This was no easy task, as the door
was made of oak and fastened by a ponderous lock and large brass
hinges. After considerable effort the door yielded to their blows and
fell in. A horrible sight met the gaze of the anxious family. Mr. Long
lay across the bed, cold and still in death, with his throat cut from ear
to ear.
Had the old man been murdered? If so, how had the murderer
entered the room? The old man was known always to keep his door
locked. Besides, there did not appear to be anything missing. If it
was a case of suicide, what had become of the implement with which
the deed had been done? It was nowhere to be found. The old man
always seemed in the best of spirits, and had every thing to live for.
If not suicide, then it was, of course, murder. Who, then, was the
murderer?
It was my good fortune to be assigned to work up the case. I say
good fortune because I like a difficult job, the more difficult the better,
and this was one of the most difficult of all I had ever undertaken.
I examined the premises, and questioned the family and the servants
in order to learn all I could about the murdered man, his habits, his
financial affairs, etc. In particular I examined the room in which the
foul murder had been committed. One of the windows was partially
opened. This suggested the theory that the murderer might have
gained access to the room by means of the window, but it was
impossible for him to have done this in broad daylight, and the
window was over 20 feet from the ground.
One of those who seemed most eager to believe that Mr. Long had
committed suicide was Thomas Brant, a scapegrace nephew of the
old man.
“If he committed suicide,” said I, “where is the implement with which
he did the deed?”
“Perhaps he used his razor and then threw it out of the window,”
suggested Thomas.
“Impossible. The jugular vein was cut and death must have been
almost instantaneous.”
Nevertheless, I examined the grass under the window (which
opened over the orchard) and found the old man’s razor. There was,
however, no blood upon it.
The most peculiar thing in the room was the lock on the door and the
key belonging to it. It was a large lock, much larger than those made
at the present time, and the key was a large, heavy, brass one
weighing several pounds. I was informed that this lock had done duty
in the door of the store in which Mr. Long started in business, and
when the building was demolished, Mr. Long preserved the lock and
key (which, by the way, he had designed himself). Furthermore, as
soon as he entered his room it was his custom to lock his door,
remove the key from the lock and hang it upon a nail on the wall.
Here it had been found on the day of the murder. There was believed
to be but one such key in existence. I believed otherwise, and made
a tour of all the lock-smith’s shops in the city in order to verify my
suspicions. At last my search was rewarded. I found one who
admitted, although at first unwilling to do so, that he had made a key
similar to the one I carried. He had made it for a young man who
answered to the description of Thomas Brant. This much gained, the
next step was to connect Brant with the murder of his uncle. This
was soon done. Brant was sent to prison for life, as it was not proved
that he had entered his uncle’s room for the purpose of murder, but
simply of robbery.
The Missing Finger.
Red Joe was an industrious young man. He worked early and late at
his profession. While others slept he toiled upward in the night; in
fact, night was his favorite time for toiling. He didn’t exactly make hay
while the sun shone because he didn’t do any work while the sun
was shining on his side of the earth. He was willing to put his hand to
almost anything that did not belong to him, and which he could
dispose of without fear of detection. Red Joe was a burglar, and a
most successful one. That is to say, he succeeded so well at the
burglary business that he spent the greater part of his time behind
prison walls. He was concerned, either alone, or in company with
others of his ilk, in some of the most important “breaks” that the
police have any record of. Whenever a big burglary was committed,
the police invariably tried to connect Red Joe with it, providing that
gentleman didn’t happen to be “otherwise engaged” at the time. This
was the case in the burglary of which I have to tell. The facts are as
follows:
The home of Mr. Reed, the rich banker, had been broken into and a
quantity of silver plate, valued at $5,000, stolen. It had occurred
during the absence of the family. The affair was reported to the
police, and a large reward offered for the detection and conviction of
the guilty parties. The police at once set about unearthing and
following up clues. But all their labor was in vain. The burglar had
carefully covered up his tracks, and left no clue as to his identity.
Nobody had seen him enter or leave the house. There was no one in
the house at the time of the robbery. The family had gone off for the
night, and the butler who had been left in charge took advantage of
their absence to visit some of his friends. During his absence—which
he averred did not extend over two hours—the burglar had come,
seen and conquered. He entered a poor man and went away
comparatively rich. At first the butler was suspected and arrested,
but he established a satisfactory alibi and was soon released from
custody.
The police did all in their power to bring the guilty ones to justice, but
failed. The affair was then placed in my hands. The solution of the
mystery seemed hopeless. The thief had left no clue as to his
identity, and none of the booty had been disposed of at any of the
pawn shops in the city or surrounding cities. I did not despair,
however. I went to the scene of the robbery and made a most
thorough examination of the premises. I found nothing. I was about
to give up when I came upon something that promised to be a clue. I
inquired from the master of the house whether there had been any
repairs made in the house recently. There had. The whole interior of
the house had been repainted and repapered just previous to the
robbery. In fact the finishing touches had been given the very day the
burglary had been committed. Good. Then getting the address of the
painter and other workmen, I went to them and made certain
inquiries which were answered to my satisfaction. Then I reported at
headquarters. Two days later, Red Joe was arrested and charged
with the robbery. His premises were searched and most of the stolen
plate recovered. The clue I had discovered was this. On the door
frame near the safe, was the imprint of fingers in the then fresh
varnish. The imprint of only the thumb and three fingers appeared.
One finger was missing—the one next to the little finger. This was a
peculiarity of Red Joe’s right hand. This discovery might mean a
good deal for me, possibly nothing. You know the result. Red Joe
was watched, and his suspicious actions furnished sufficient grounds
for the issuing of a warrant for his arrest. He is now “doing time.”
A Grave Robbery.
One of the most peculiar cases with which I have ever had to deal
was that of a grave robbery. The grave—or rather the vault, in which
the remains of Mr. L——, a wealthy Russian (I do not give his name
for reasons which will presently appear), had been deposited was
found disturbed two days after the burial. Examination proved that
the lid of the casket had been removed with the apparent intention of
robbery. But, strange to say, no robbery had been committed. The
gold rings on the fingers of the dead man had not been touched, and
these were the only valuables the body contained. Why had the
grave been opened? Nobody could offer an explanation, least of all I
who had been detailed at the desire of the family of the dead man to
sift this strange affair to the bottom, and discover, if possible, who
had dared to desecrate the grave of their relative. Nothing had been
taken from the body as far as the family of the dead man knew; yet
the thief or thieves had plenty of time in which to rob the body if they
so desired. They had not been frightened off. They had carefully
covered up the grave and gone away evidently unmolested.
It was impossible to arrive at a conclusion as to why the grave had
been opened. It now lay with me to find out who had done it. It had
rained during or previous to the time of the grave robbery, and the
footprints of those concerned in it—three different persons it
appeared, were plainly discernible in the soft ground. The signs of
carriage wheels were also present. This was my only clue upon
which I had to work. I questioned the superintendent, whose office
and residence was at the entrance to the cemetery. He had been
away on the evening of the robbery, and could give me no
information. He was confident no carriage had entered the cemetery
after 10 o’clock, at which hour he had returned and locked the
cemetery gates. There was only one carriage entrance to the
cemetery. I had an impression at the time that the man was
unnecessarily nervous in answering my questions, and seemed
relieved when I got through.
A month passed and an event occurred which threw considerable
light upon the mystery. The will of the late Mr. L—— had been
opened and read. Among the many bequests was the following most
peculiar one: “I bequeath to John Johnson, the dentist (with
address), a certain gold-capped tooth in my lower jaw, and request
that he extract this and preserve it according to the terms of an
agreement made between us many years ago.” This not only threw
light upon, but complicated the mystery. Perhaps the grave had been
opened to allow the dentist to claim his strange legacy. Once more
the body was disinterred by the friends of the dead man. The gold-
capped tooth was missing from the lower jaw.
I next called upon John Johnson, the dentist. Despite his American
name I could see that he was a foreigner—a Russian, I was certain.
I mentioned the occasion of my visit. “Did you open the grave of Mr.
L—— and remove a certain gold-capped tooth from the mouth of the
dead man?” I asked, point blank.
Mr. Johnson seemed at a loss how to reply. At last, he said “No.”
“Then the cemetery superintendent was wrong. You did not drive in
with two companions in a carriage, and this is not your card which I
picked up near the grave of Mr. L——?” said I, showing him one of
his business cards which I had surreptitiously obtained. “You might
as well confess. You were only getting your rights, after all, but why
did you go about it in such an underhanded way?”
“I don’t understand you.”
“Are you not acquainted with the contents of Mr. L——’s will, the
gold-capped tooth and all?”
“Did he put that in the will?” inquired the dentist in a surprised tone.
“Then you do know something about it?”
“Yes; it is a strange story, and if you will promise—nay, swear—never
to reveal it, I will tell it to you. Do you swear?”
Something in the manner and bearing of the man told me that he
was no thief, and I readily promised what he asked, and he told me
the following strange story:
A Strange Story.
Mr. Johnson conducted me into an inner room, closed and locked
the door and bade me be seated.
“My name,” he began, “is not John Johnson. I am living under an
assumed name for reasons of a political nature. I am a Russian by
birth, and a Nihilist by thought and training. I deplore the condition of
my unhappy country. I have done my part and am still willing to do it,
to help bring about her freedom from the terrible despotism under
which she suffers. I am acquainted with the horrors of Siberian
prison-mines. I was sentenced to Siberia for life, for complicity in a
Nihilistic plot. My brother was sent there soon afterward. Together
we planned escape. I succeeded. He fell. Shot down by an officer of
his Despotic Majesty. I managed to reach England, where I found
many friends. In London I became acquainted with the late Mr. L
——. He was also a Nihilist, and a victim of Alexander’s wrath. He,
too, was an exile from his country. For either of us to return meant
instant capture at the hands of the Czar’s well-trained police—or
worse than that, Siberia. I lived in London five years. There I learned
the trade of a dentist. Upon my banishment to Siberia, my property
had been confiscated to the government.
“At the end of five years I came to the United States, where I have
lived ever since. Mr. L—— came here soon after I did. He was a rich
man. Just previous to his arrest, he had managed to convert most of
his property into money which he deposited in a London bank. This
had been used to effect his escape from Siberia. He had relatives in
this country with whom he lived up to the time of his death. Soon
after coming to this country, he imparted to me a secret which had
been in his keeping for thirty years, it having been transmitted to him
by his father. He was then a man of sixty. One day, ten years ago, he
came into my office—this very room—and said he wished to speak
with me upon a most important matter, one concerning our beloved
country.
“‘Do you see this tooth,’ he inquired, pointing to a large, gold-capped
molar in his lower jaw.
“‘Yes,’ I replied.
“‘That tooth,’ he continued, after having made sure that we were
alone, ‘that tooth holds, has held for thirty years, a secret of the
utmost importance to you and me, and to all liberty loving Russians. I
tell you this because I know you will guard the secret as you would
your life. In the cavity of that tooth, under the gold cap (here he
lowered his voice) is a piece of parchment which contains the plans
of a secret underground entrance to the Czar’s palace at St.
Petersburg, an entrance which, as you will readily understand, will
prove of the utmost importance to our friends when the time is ripe to
use it. This plan has been in the possession of our family for
hundreds of years, having been drawn originally by an ancestor of
mine, one of the designers of the palace. I am the last male member
of my family, and now bequeath this secret to you. Upon my death, I
desire that you extract the tooth, and preserve or dispose of the plan
in whatever way seems best to you. You know its importance. I can
rely upon your judgment. The dentist who inserted it in my tooth,
thirty years ago in Russia, is now dead. You and I alone now hold
the secret. Do you accept the trust?’
“‘I do,’ I answered.
“That was Mr. L——’s story.
“When he died I happened to be out of the city. On my return I
hastened to obtain possession of the tooth in the manner that
seemed best to me. I was not aware that the matter was mentioned
in Mr. L——’s will, which it would appear he had intended to make
public before his death, but was unable to do so. The plan which I
found in the cavity of the tooth is now in safe hands in Russia, and
the world may yet learn whether the well-guarded secret is destined
to be utilized.
“I tell you this because I know you are an American, a lover of liberty,
and will not divulge the secret I have told you.”
Mr. Johnson died many years ago, and now I give this story to the
world, confident that even its perusal by the Russian officials cannot
in any way endanger the secret of the gold-capped tooth.
Transcriber’s Note:
Punctuation has been made consistent.

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Cornerstones of Cost Accounting 1st Edition Hansen Test

True / False Questions

1. The human resource department in a manufacturing company would be considered a

Multiple Choice Questions

22. Service department costs are

34. Allocated joint costs are useful for

38. Which of the following statements is false?

39. Net realizable value at the split-off point is used to allocate

43. Products with a relatively minor sales value are called

Rent paid for the area used is $720,000

Expected costs in the service departments for June are as follows:

Use of services by other departments is as follows.

62. The equation for department P1 (subassemblies) is

63. The equation for department P2 (final assembly) is

64. The equation for department P3 (marketing) is

65. The equation for department S1 (building occupancy) is

66. The equation for department S2 (research and development) is

67. The equation for department S3 (supervision) is

Production and sales

Chapter 11 Service Department and Joint Cost Allocation Answer Key

True / False Questions

1. The human resource department in a manufacturing company would be considered a

Human resources would not be involved with manufacturing itself.

All costs are allocated directly to the producing departments.

The selection process is the same for both methods.

Only half of the reciprocal services are recognized.

Direct costs + costs allocated from other services = total cost.

The reciprocal method is the most accurate method.

The reciprocal method should be used.

This is the definition of joint products.

Actual market value is better than an estimate.

This is the definition of estimated net realizable value.

These additional costs are incremental and would be relevant.

They will be there whatever the end decision is.

The sales value is immaterial, so the alternate results would be immaterial.

Multiple Choice Questions

Allocations of services does not provide incentives for service levels.

22. Service department costs are

Custodial services cleans space, so space occupied would be logical

Assembly is a producing department, not a service department.

Revenues are never a good base for allocating service costs

No reciprocal services are recognized.

By-products can be recognized either at time of production or time of sale.

34. Allocated joint costs are useful for

This is the definition of estimated net realizable value.

38. Which of the following statements is false?

It is the final selling price minus the additional processing costs.

39. Net realizable value at the split-off point is used to allocate

The net realizable value method is used for joint costs.

Dollars of labor is not a physical measurement, it is a value measurement.

A by-product has minimal value relative to the main products.

43. Products with a relatively minor sales value are called

This is the definition of by-product.

[250/(265 + 250)]  $37,125 = $18,021.84