PPT: Joint Products & By Products | Cost and Management Accounting for CA Intermediate PDF Download

 Page 1


• 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, no cost methods are 
frequently used to account for by-
products. 
 
CHAPTER SUMMARY  
Page 2


• 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, no cost methods are 
frequently used to account for by-
products. 
 
CHAPTER SUMMARY  
JOINT PRODUCTS: 
 When two are more products are produced from the same basic raw material 
and are of almost equivalent value, it is known as joint product. 
? EXAMPLE: 
 In refining of crude oil, both  petrol and diesel is obtained. 
 
By PRODUCTS: 
 By product are incidental products resulting from the processing of another 
product. 
? EXAMPLE: 
 In processing of sugarcane both sugar and molasses is obtained 
 
      
 
 
 
 
 
 
 
 
 
JOINT PRODUCTS AND BY-PRODUCTS 
Sales Value 
Low 
Main Products 
Joint Products 
High 
By Products 
Page 3


• 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, no cost methods are 
frequently used to account for by-
products. 
 
CHAPTER SUMMARY  
JOINT PRODUCTS: 
 When two are more products are produced from the same basic raw material 
and are of almost equivalent value, it is known as joint product. 
? EXAMPLE: 
 In refining of crude oil, both  petrol and diesel is obtained. 
 
By PRODUCTS: 
 By product are incidental products resulting from the processing of another 
product. 
? EXAMPLE: 
 In processing of sugarcane both sugar and molasses is obtained 
 
      
 
 
 
 
 
 
 
 
 
JOINT PRODUCTS AND BY-PRODUCTS 
Sales Value 
Low 
Main Products 
Joint Products 
High 
By Products 
JOINT PRODUCTS AND BY-PRODUCTS 
• A by-product has a relatively low sales value compared 
with the sales value of a joint or main product. 
?Revenue from byproducts generally reduces the costs of the 
joint products. 
 
 
• Some outputs of the joint production process have zero 
sales value. 
?No journal entries are made to record the processing of such 
outputs with zero sales value. 
 
Page 4


• 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, no cost methods are 
frequently used to account for by-
products. 
 
CHAPTER SUMMARY  
JOINT PRODUCTS: 
 When two are more products are produced from the same basic raw material 
and are of almost equivalent value, it is known as joint product. 
? EXAMPLE: 
 In refining of crude oil, both  petrol and diesel is obtained. 
 
By PRODUCTS: 
 By product are incidental products resulting from the processing of another 
product. 
? EXAMPLE: 
 In processing of sugarcane both sugar and molasses is obtained 
 
      
 
 
 
 
 
 
 
 
 
JOINT PRODUCTS AND BY-PRODUCTS 
Sales Value 
Low 
Main Products 
Joint Products 
High 
By Products 
JOINT PRODUCTS AND BY-PRODUCTS 
• A by-product has a relatively low sales value compared 
with the sales value of a joint or main product. 
?Revenue from byproducts generally reduces the costs of the 
joint products. 
 
 
• Some outputs of the joint production process have zero 
sales value. 
?No journal entries are made to record the processing of such 
outputs with zero sales value. 
 
 
? Joint costing 
 When by a process more than one product is produced, the 
 material and conversion cost incurred prior to split of stage is  know 
as joint cost.  
 
 
 
 
 
 
 
 
• SPLIT OFF POINT 
  Split-off point is the juncture in the process when separate 
  identifiable products emerge. 
• SEPARABLE COST 
  Separable costs are costs incurred beyond the split-off point 
  and are assignable to separate products. 
 
WHAT  IS  JOINT COSTING 
 
Joint 
Costs 
 
Product A  
 
Separable 
Costs A 
 
Product B  
 
Separable 
Costs B 
 
Split-off 
Point 
Page 5


• 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, no cost methods are 
frequently used to account for by-
products. 
 
CHAPTER SUMMARY  
JOINT PRODUCTS: 
 When two are more products are produced from the same basic raw material 
and are of almost equivalent value, it is known as joint product. 
? EXAMPLE: 
 In refining of crude oil, both  petrol and diesel is obtained. 
 
By PRODUCTS: 
 By product are incidental products resulting from the processing of another 
product. 
? EXAMPLE: 
 In processing of sugarcane both sugar and molasses is obtained 
 
      
 
 
 
 
 
 
 
 
 
JOINT PRODUCTS AND BY-PRODUCTS 
Sales Value 
Low 
Main Products 
Joint Products 
High 
By Products 
JOINT PRODUCTS AND BY-PRODUCTS 
• A by-product has a relatively low sales value compared 
with the sales value of a joint or main product. 
?Revenue from byproducts generally reduces the costs of the 
joint products. 
 
 
• Some outputs of the joint production process have zero 
sales value. 
?No journal entries are made to record the processing of such 
outputs with zero sales value. 
 
 
? Joint costing 
 When by a process more than one product is produced, the 
 material and conversion cost incurred prior to split of stage is  know 
as joint cost.  
 
 
 
 
 
 
 
 
• SPLIT OFF POINT 
  Split-off point is the juncture in the process when separate 
  identifiable products emerge. 
• SEPARABLE COST 
  Separable costs are costs incurred beyond the split-off point 
  and are assignable to separate products. 
 
WHAT  IS  JOINT COSTING 
 
Joint 
Costs 
 
Product A  
 
Separable 
Costs A 
 
Product B  
 
Separable 
Costs B 
 
Split-off 
Point 
Why  Allocate  Joint  Costs? 
Allocate joint costs to products for: 
• inventory costing and cost of goods sold 
calculations. 
• cost reimbursement under contracts 
• customer profitability analysis 
• insurance settlement computations 
• rate regulation situations