1. Distinguish between the sales value at splitoff method and the NRV method.

1. Only the sales value at splitoff method uses market selling-price data in allocating joint costs. The sales value at splitoff method allocates joint costs to joint products on the basis of the relative total sales value at the splitoff point of the total production of these products during the accounting period. The net realizable value method allocates joint costs using physical measures, such as the relative weight quantity, or volume at the splitoff point.

2. Both methods use market selling-price data in allocating joint costs, but they differ in which sales-price data they use. The sales value at splitoff method allocates joint costs to joint products on the basis of the relative total sales value at the splitoff point of the total production of these products during the accounting period. The net realizable value method allocates joint costs to joint products on the basis of the relative net realizable value (the final sales value minus the separable costs of production and marketing) of the total production of the joint products during the accounting period.

3. Both methods use physical measures, such as the relative weight, quantity, or volume at the splitoff point to allocate joint costs.

4. Only the net realizable value method uses market selling-price data in allocating joint costs. The net realizable value method allocates joint costs to joint products on the basis of the relative net realizable value (the final sales value minus the separable costs of production and marketing) of the total production of the joint products during the accounting period. The sales value at splitoff method allocates joint costs using physical measures, such as the relative weight quantity, or volume at the splitoff point.

2. Which of the following is an advantage of using practical capacity to allocate costs?

1. is that budgets are much easier to develop

2. is that it allows a downward supply spiral to develop

3. is that it focuses management's attention on managing unused capacity

4. is that it results in departments bearing a lower percentage of fixed costs

3. The reciprocal allocation method:

1. is the most widely used because of its simplicity

2. allocates supportdepartment costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments

3. requires the ranking of support departments in the order that the allocation is to proceed

4. fully incorporates interdepartmental relationships into the supportdepartment cost allocations