7 000 B
6 000 C
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Accounting for by-products
The sales of the by-product may be treats as:
Added to sales of the main product
Treated as a separate, incidental source of income
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Allocating Joint Costs
Joint costs
If we allocate the joint costs of raising the animal to the two products based on weight, which product
Various methods: as specified in question
Do not allocate costs Various methods
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Joint Costs
A single cost incurred in producing or purchasing two or more different products.
Product One Two Three
Percent
Joint
Allocated
Value of Total
Cost
Cost
$ 80,000
20% × $ 200,000 = $ 40,000
200,000
50% × 200,000 = 100,000
120,000
30% × 200,000 = 60,000
Paper F2
Management Accounting
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Chapter 12 Process costing, joint products and by products
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Chapter Preview
Process costing, joint & by-products
Similar to an indirect expense since it is shared among more than one cost object.
Example: The cost of crude oil is a joint cost for many petrochemical products.
5
Joint products and by-products - accounting
Joint products
Substantial sales value
By-products
Relatively low sales value Secondary to process
Apportion joint costs
Joint products
By-products
Allocating joint costs
Accounting treatments
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Joint products and by-products
forestry
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Direct material(3000units) $60 000
/
Conversion costs
$76 500 $226 200
Normal loss
10% of input
Scrap value of normal loss $0.5$2源自Output (units)
26 000 10 000 A
Deducted from the cost of production or cost of sales of the main product
would receive the largest cost allocation?
Hamburger, because there is more of it.
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Allocating Joint Costs
Joint costs
If we allocate the joint costs of raising the animal to the two products based on sales value, would the steak receive a greater portion of the cost allocation?
Joint products
By product
4
Joint products and by-products
Inputs
Process
(Joint costs)
Split-off point
Product 1 Product 2 By-product
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Yes, steak has a higher sales value than hamburger.
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Allocating Joint Costs on a Value Basis
Product One Sales value = $80,000
$200,000 Joint Cost
Total $ 400,000 100%
$ 200,000
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Joint products in process accounts
Example: P248-3.1
Data for the period are as follows.
process 1 process 2
Product Two Sales value = $200,000
Product Three Sales value = $120,000
Allocate the $200,000 joint cost based on sales value.
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Allocating Joint Costs on a Value Basis