Scribd Logo
Upload

Welcome to Scribd!

  • 341 views

    Joint Cost Allocation

    Uploaded by

    Muhammad Haris Fajar Rahmatullah
    Joint Cost Alokasi

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd

    Joint Cost Allocation

    Uploaded by

    Muhammad Haris Fajar Rahmatullah
    341 views20 pages
    Joint Cost Alokasi

    Copyright

    © © All Rights Reserved

    Available Formats

    PPT, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Joint Cost Alokasi

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    341 views20 pages

    Joint Cost Allocation

    Uploaded by

    Muhammad Haris Fajar Rahmatullah
    Joint Cost Alokasi

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 20

    Cost Allocation:

    Joint Products and Byproducts

    Joint Cost Terminology


    Joint Costs costs of a single production process

    that yields multiple products simultaneously


    Splitoff Point the place in a joint production process
    where two or more products become separately
    identifiable
    Separable Costs all costs incurred beyond the
    splitoff point that are assignable to each of the nowidentifiable specific products

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-2

    Joint Cost Terminology

    Categories of Joint Process Outputs:


    1.
    2.

    Outputs with a positive sales value


    Outputs with a zero sales value

    Product any output with a positive sales


    value, or an output that enables a firm to
    avoid incurring costs

    Value can be high or low

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-3

    Joint Cost Terminology


    Main Product output of a joint production

    process that yields one product with a high


    sales value compared to the sales values of
    the other outputs
    Joint Products outputs of a joint production
    process that yields two or more products with
    a high sales value compared to the sales
    values of any other outputs

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-4

    Joint Cost Terminology


    Byproducts outputs of a joint production

    process that have low sales values compare


    to the sales values of the other outputs

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-5

    Joint Process Flowchart

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-6

    Reasons for Allocating Joint Costs


    Required for GAAP and taxation purposes
    Cost values may be used for evaluation

    purposes
    Cost-based contracting
    Insurance settlements
    Required by regulators
    Litigation

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-7

    Joint Cost Allocation Methods


    Physical Measures allocate using tangible
    attributes of the products, such as pounds,
    gallons, barrels, etc.
    Market-Based allocate using marketderived data (dollars):

    1.
    2.
    3.

    Sales value at splitoff


    Net Realizable Value (NRV)
    Constant Gross-Margin percentage NRV

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-8

    Physical-Measure Method
    Allocates joint costs to joint products on the

    basis of the relative weight, volume, or other


    physical measure at the splitoff point of total
    production of the products

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-9

    Physical-Measure Example
    Consider the following example of two products

    arising out of one joint process costing $500


    Assumes 1 gallon of Cream is equal to 1 gallon of
    Skim-milk

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-10

    Sales Value at Splitoff Method


    Uses the sales value of the entire production

    of the accounting period to calculate


    allocation percentage
    Ignores inventories

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-11

    Sales Value at Splitoff Example

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-12

    Net Realizable Value Method


    Allocates joint costs to joint products on the

    basis of relative NRV of total production of the


    joint products
    NRV = Final Sales Value Separable Costs

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-13

    NRV Example

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-14

    Constant Gross Margin NRV Method


    Allocates joint costs to joint products in a way

    that the overall gross-margin percentage is


    identical for the individual products
    Joint Costs are calculated as a residual
    amount

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-15

    Constant Gross Margin NRV Method


    Example

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-16

    Method Selection
    If selling price at splitoff is available, use the Sales

    Value at Splitoff Method


    If selling price at splitoff is not available, use the NRV
    Method
    If simplicity is the primary consideration, PhysicalMeasures Method or the Constant Gross-Margin
    Method could be used
    Despite this, some firms choose not to allocate joint
    costs at all

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-17

    Sell-or-Process Further Decisions


    In Sell-or-Process Further decisions, joint

    costs are irrelevant. Joint products have


    been produced, and a prospective decision
    must be made: to sell immediately or process
    further and sell later
    Joint Costs are sunk
    Separable Costs need to be evaluated for
    relevance individually

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-18

    Sell-or-Process Further Flowchart

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-19

    Byproducts
    Two methods for accounting for byproducts
    Production Method recognizes byproduct

    inventory as it is created, and sales and costs


    at the time of sale
    Sales Method recognizes no byproduct
    inventory, and recognizes only sales at the
    time of sales: byproduct costs are not tracked
    separately

    To accompany Cost Accounting 12e, by Horngren/Datar/Foster. Copyright 2006 by Pearson Education. All rights reserved.

    16-20

    You might also like