630 wk3 db1 res | Business & Finance homework help

Respond to…

Connect with a professional writer in 5 simple steps

Please provide as many details about your writing struggle as possible

Academic level of your paper

Type of Paper

When is it due?

How many pages is this assigment?

Describe the three methods used to allocate joint costs.

Companies that produce more than one product will usually have joint costs.  According to Schneider (2017), “ the costs of materials and processing up until individual products are identifiable are referred to as joint costs” (p. 180).  There are three methods associated with allocating these types of costs; physical measures of output, relative sales value (RSV) and net realizable value (NRV).  Each method is based on outputs and the split-off point of individual products.  The simplest method is the physical measures of output are determined by the measurable physical features of each product to include; weight length volume etc., while the RSV method depends on the proportion of the products total sales value at the split-off point (Schneider, 2017).  The physical measures of output is commonly used for a company that produces a several stock keeping unit (SKU), while RSV might be used by a jewelry store that sells a variety of precious stones and medals that each have their own value.  On the other side of the spectrum is NRV, which is a product’s maximum net amount, which can be received from the sale of that product with a short period of time (McKeown, 1972).  The concept occurs when a when the costs of the product is subtracted from the market value.   

What are the advantages/disadvantages of each allocation method?

Each particular method has its pros and cons. For instance an advantage of the physical measures of output is its simplicity.  However, what makes the method so simple can also be a disadvantage when dealing with products that differing physical features. 

RSV is helpful as it provides the capability to regulate costs to ensure proper reporting of capital and asset losses, this can aid in managerial decision-making.  However, this method depends on the availability of sales value.  If not immediately available or not exact it can cause a business to defer to another method to determine the costs at the spilt-off point (Schneider, 2017).  Because of this the NRV can has the advantage of helping with the void that could occur with RSV, but a con of this concept is that there are occasions were the product’s NRV is negative causing the inability for joint costs to be allocated to the product. 

Which method would you recommend?

As we can see there is no perfect method and the one used is really dependent on the products being produced.  Therefore my recommendation on which method to used would be based on the business and what product is being produced.  Also in some cases the product would allow the methods to be interchangeable.  Therefore if one method is not benefiting the company it can switch to another that is more suitable.

References:

McKeown, J. C. (1972). Additivity of Net Realizable Values. Accounting Review47(3), 527–532. Retrieved from http://search.ebscohost.com.proxy-library.ashford.edu/login.aspx?direct=true&db=bsh&AN=4503171&site=eds-live&scope=site (Links to an external site.)

Schneider, A. (2017). Managerial Accounting: Decision making for the service and manufacturing sectors (2nd ed.) [Electronic version]. Retrieved from https://content.ashford.edu/

Respond to…

Joint cost is referred to cost that is collected during the processing phase, but doesn’t produce an identifiable product. There are three allocation methods can be used when allocating joint cost. These methods are: physical measure of output, retaliative sales value and bet realizable value (Schneider, 2017). 

Physical measure of outputs is allocated by a unit of measurement and this can be either units, length, volume, weight, etc. It can be any unique identifier that is used to measure that substance. This method is very simplistic from an accounting standpoint, but one concern is difference units of measurement could cause issues in the future. Dependent on the chemical makeup of the product will determine what unit of measurement is used. It could be difficult and cause confusion when trying to convert each item to a simple unit of measurement. 

The relative sales value method takes product sales divided by total sales and multiplies by the joint cost. The goal is to allocate by the total sales at the split-off point. A positive attribute of this method is that if the allocation is done by a sales figure than the allocation will be extremely accurate because sales can be tied back to the product sold, but on the other hand there might be a lag in sales therefore that allocation method couldn’t be done until sales are completed. 

Lastly, net realizable value’s goal is to use approximations of the sales value to allocate the joint cost. NRV is calculated by taking revenues and subtract out the separable cost. This method allows to better trace a cost back to original product, but there are instances where the NRV is negative. If this were to happen no allocation can happen for that cost. This could slow down accounting procedure and take up unneeded space in capital. 

Personally I recommend using the physical measurement as the allocation method due to it’s simplicity and the data is easily accessible. For the most part an industry will use simple units of measurement because they will be producing like products. By using this method there is no lag time waiting for sales numbers to comes through or projecting sales. The number of units is available immediately after production. 

Schneider, A. (2017). Managerial Accounting: Decision making for the service and manufacturing sectors (2nd ed.) [Electronic version]. Retrieved from https://content.ashford.edu/

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our Guarantees

At 111papers.com, we value all our customers, and for that, always strive to ensure that we deliver the best top-quality content that we can. All the processes, from writing, formatting, editing, and submission is 100% original and detail-oriented. With us, you are, therefore, always guaranteed quality work by certified and experienced writing professionals. We take pride in the university homework help services that we provide our customers.

Money-Back Guarantee

As the best homework help service in the world, 111 Papers ensures that all customers are completely satisfied with the finished product before disbursing payment. You are not obligated to pay for the final product if you aren’t 100% satisfied with the paper. We also provide a money-back guarantee if you don’t feel that your paper was written to your satisfaction. This guarantee is totally transparent and follows all the terms and conditions set by the company.

Read more

Zero-Plagiarism Guarantee

All products that we deliver are guaranteed to be 100% original. We check for unoriginality on all orders delivered by our writers using the most advanced anti-plagiarism programs in the market. We, therefore, guarantee that all products that we submit to you are 100% original. We have a zero-tolerance policy for copied content. Thanks to our strict no plagiarized work rule, you can submit your homework to your professor without worrying.

Read more

Free-Revision Policy

TThis is one of the most cherished courtesy services that we provide to help ensure that our customers are completely satisfied with our finished products. Delivering the best final product to our customers takes multiple inputs. 111papers.com prides itself on delivering the best university homework help services in the writing industry. And, in part, our free revision policy is how we do it. What’s more, all our revisions are 100% free without any strings attached.

Read more

Privacy Policy

Client privacy is important to use. We know and understand just how important customers value their privacy and always want to safeguard their personal information. Thus, all the information that you share with us will always remain in safe custody. We will never disclose your personal information to any third party or sell your details to anyone. 111 Papers uses the most sophisticated, top-of-the-line security programs to ensure that our customers’ information is safe and secured.

Read more

Fair-Cooperation Guarantee

Placing your order with us means that you agree with the homework help service we provide. We, in turn, will endear to ensure that we do everything we can to deliver the most comprehensive finished product as per your requirements. We will also count on your cooperation to help us deliver on this mandate. Yes, we also need you to ensure that you have the highest-quality paper.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency