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Problem 1: While preparing a salad, the chef removes the core from a head of lettuce. This core would be classified as
a. defective.
b. shrinkage.
c. waste.
d. scrap.
Problem 2: By-products are
a. items resulting from a joint process that have no further value.
b. not sufficient alone, in terms of sales value, for management to justify undertaking the joint process.
c. also known as scrap.
d. the primary reason management undertook the production process.
Problem 3: The net realizable value approach mandates that the NRV of the by-products/scrap be treated as
a. an increase in joint costs.
b. a sunk cost.
c. a reduction of joint costs.
d. a cost that can be ignored totally.
Financial Statement Analysis and Preparation
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Computation of Free Cash Flow
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