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:
Joint products
By-products
Scrap
NRV = Product final sales value - FPC - Disposal costs
Methods of Allocating Joint Costs to Joint Products
Physical Measure Method
Monetary Measure Method
SV @ Split-off Point Method
NRV Method (Approx. MV)
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 unitsproduced
Accounting for By-products
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:
Other sales revenue
Ded to COGS of main product
Other income
Deduction to TMC
By-products are recognized when produced - BP is considered part of the inventory