Scribd
Upload
120 views2 pages

General Characteristics of Joint Production

Cost Accounting

Uploaded by

Erwin Labayog Medina
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF or read online on Scribd
120 views2 pages

General Characteristics of Joint Production

Cost Accounting

Uploaded by

Erwin Labayog Medina
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF or read online on Scribd
You are on page 1/ 2
Joint Product and By-Product Costing LEARNING OBJECTIVES After studying this chapter, you should be able to: 41. Identify the characteristics of the joint production process. 2. Allocate joint product costs according to the benefits-received approaches and the relative market value approaches. 3. Describe methods of accounting for by-products. Explain why joint cost allocations may be misleading in management decision making. - 5. Discuss why joint production is seldom found in service industries. CHAPTER SUMMARY This chapter describes the joint production processes and their outputs—joint products and by- products. Several methods are developed to allocate joint costs to joint products. By-products are not usually allocated any of the joint costs. Instead, noncost methods are frequently used to ac- count for by-products. This chapter concludes with the caution that allocated joint costs are not useful for output and pricing decisions. Further processing costs are used in management deci- sion making. CHAPTER REVIEW 1. General Characteristics of Joint Production + Learning Objective #1 Joint products are two or more products produced simultaneously by the same process. Joint products become separate and identifiable at the split-off point. Review textbook Exhibit 7-1, which depicts the joint production process. A. Cost Separabilty and the Need for Allocation 1. Joint costs are the total of the raw material, labor, and overhead costs incurred up to the initial split-off point a. Joint costs can be allocated to the final product only in some arbitrary manner because such costs cannot be traced directly to the products they benefit. b. Joint cost allocation is performed to meet the requirements of financial report- ing (GAAP) and federal income tax law for income measurement and inventory valuation. In addition, joint cost allocation is useful in costing for government cost-type contracts and in justifying prices for legislative or administrative regu- lations. c. Joint cost allocation is much less useful for cost control and managerial deci- sion making. 2. Separable costs are those costs incurred after the split-off point; they can be easily traced to individual products. B. Distinction and Similarity Between Joint Products and By-Products 1 The distinction between joint products and by-products rests solely on the relative importance of their sales value A by-product is a secondary product whose total sales value is relatively minor in comparison with the sales value of the main product (joint product) Relationships between joint products and by-products change over time as tech- nology and markets change. a. By-products may become more and more important, eventually becoming joint products. b. When the relative importance of individual products changes, the products need to be reclassified and the costing procedures need to be changed Review textbook Exhibit 7-3, which gives examples of Joint products and by-products for various industries.

You might also like