Joint & By-Product

Cards (12)

  • Under the joint production process, the joint products are the main or primary outputs. While the by-products and scrap are the incidental outputs.
  • Split-off point is the point in the production process where the outputs are separately identified.
  • Any costs incurred after split-off to process further the product to become saleable is known as further processing cost or separable costs.
  • True or False.
    By-products are incidental and saleable products that have a sale value relatively higher than the joint products
    False
  • Scrap - it is a residual material that has a minimal but distinct disposal value
  • Hierarchy of Products in terms of value:
    1. Joint products
    2. By-products
    3. Scrap
  • NRV = Product final sales value - FPC - Disposal costs
  • Methods of Allocating Joint Costs to Joint Products
    1. Physical Measure Method
    2. Monetary Measure Method
    3. SV @ Split-off Point Method
    4. NRV Method (Approx. MV)
    5. Weighted Average Method
  • Physical Measure Method - based on a common physical characteristics or # of units produced
  • Monetary Measure Method - costs are allocated based on sales value of individual products. Shows the direct relationship existing between the sales price and cost of the product.
  • Weighted average method = weight factors assigned x # of units produced
  • Accounting for By-products
    1. By-products are recognized when realized (sold) - no joint cost to by-products as they are of minor importance
    • Net revenue is presented in IS as:
    1. Other sales revenue
    2. Ded to COGS of main product
    3. Other income
    4. Deduction to TMC
    5. By-products are recognized when produced - BP is considered part of the inventory
    • NRV Method
    • Reversal costs method