Joint Products and Cost
Joint products and cost described that when the cost of two products is not easily distinguished due to same manufacturing process. Joint products and cost are allocated on the basis of selling price of each product. Joint products and cost is beneficial as it saves the manufacturing cost.
Weighted Average Method–Allocating Joint Product Cost: Learning Objectives: Explain the procedure of allocating joint product cost when weighted average method is used. many industries, the previously described methods do not give a satisfactory answer to the joint cost apportionment problem. For this reason, weight
Learning Objectives: Define and explain replacement cost method. What is the use of replacement cost method while cost by-products? Replacement cost method ordinarily is applied by firms whose by-products are used within the plant, thereby avoiding the necessity of purchasing materials and supplies from
Recognition of Net Revenue Method–By Product Costing: This method recognizes the need for assigning some cost to the by-product. It does not attempt, however, to allocate any main product cost to the buy product. Any expenses involved in further processing or marketing the by-product
Recognition of Gross Revenue Method–By Products Costing: This method is typical non-cost procedure in which the final inventory cost of the main product is overstated to the extent that some of the cost belongs to the by product. However this shortcoming is somewhat removed
Market Value Method or Reversal Cost Method: Learning Objectives: Define and explain market value method. Explain the use of market value method while costing by-products Market value method or Reversal cost method is similar to the last technique (By Product Revenue deducted from Production
Market or Sales Value Method–Allocation of Joint Cost: Learning Objectives: Explain the market value method or sales value method of joint cost allocation between products. Market or sales value method enjoys great popularity because of the argument that market value of any product is
Difficulties / Problems in Costing by Products and Joint Products: By products and joint products are difficult to cost because a true joint cost is indivisible. For example, an ore might contain both lead and Zink. In the raw state, these minerals are joint
Joint Product Cost Analysis for Managerial Decisions and Profitability Analysis: Learning Objectives: What is the importance of joint product cost analysis for management. The Securities and Exchange Commission requires that annual reports to stock holders include data by lines of business. Likewise, the Federal
By Products and Joint Products: After studying this chapter you should be able to: Many industrial concerns are confronted with the difficult and often rather complicated problem of assigning costs to their by-products and joint products. Chemical companies, coke manufacturers, refineries, flour mills, coal
By-Products and Main Products: Learning Objectives: Define and explain By-Products. Definition and Explanation of By Products: The term “by product” is generally used to denote one or more products of relatively small total value that are produced simultaneously with a product of greater total
Characteristics of Joint Products and Joint Cost: Many products or services are linked together by physical relationships which necessitate simultaneous production. To the point of split-off or to the point where these several products emerge as individual units, the cost of the products forms