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    Accounting For Joint Products and By-Products

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    nicole bancoro
    The document discusses accounting for joint products and by-products. It defines joint products as those produced simultaneously from the same raw materials and process that each have significant sales value. Joint or common costs incurred before products split off cannot be identified to a specific product. Additional processing costs occur after the split-off point. The physical measure method, sales value at split-off point, and adjusted sales value method are described to allocate joint costs between joint products. Two case studies are provided to illustrate the allocation methods.

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    Accounting For Joint Products and By-Products

    Uploaded by

    nicole bancoro
    32 views14 pages
    The document discusses accounting for joint products and by-products. It defines joint products as those produced simultaneously from the same raw materials and process that each have significant sales value. Joint or common costs incurred before products split off cannot be identified to a specific product. Additional processing costs occur after the split-off point. The physical measure method, sales value at split-off point, and adjusted sales value method are described to allocate joint costs between joint products. Two case studies are provided to illustrate the allocation methods.

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    The document discusses accounting for joint products and by-products. It defines joint products as those produced simultaneously from the same raw materials and process that each have significant sales value. Joint or common costs incurred before products split off cannot be identified to a specific product. Additional processing costs occur after the split-off point. The physical measure method, sales value at split-off point, and adjusted sales value method are described to allocate joint costs between joint products. Two case studies are provided to illustrate the allocation methods.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    32 views14 pages

    Accounting For Joint Products and By-Products

    Uploaded by

    nicole bancoro
    The document discusses accounting for joint products and by-products. It defines joint products as those produced simultaneously from the same raw materials and process that each have significant sales value. Joint or common costs incurred before products split off cannot be identified to a specific product. Additional processing costs occur after the split-off point. The physical measure method, sales value at split-off point, and adjusted sales value method are described to allocate joint costs between joint products. Two case studies are provided to illustrate the allocation methods.

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    © All Rights Reserved
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    Download as pptx, pdf, or txt
    of 14

    CHAPTER 14

    z
    Accounting for
    Joint Products
    and By-Products
    What are Joint Products?

    Joint products are individual products, each with significant sales value, which are
    produced simultaneously from the same raw materials and/or manufacturing process.

    Characteristics of Joint Products

    Examples of Joint Products


    JOINT COSTS AND THE SPLIT-OFF POINT

    Joint costs or common costs consist of direct materials, direct labor and
    manufacturing overhead incurred from the start of the process up t the
    point of separation (split-off point). Those costs are indivisible, because
    they cannot be identified to any of the products being simultaneously
    produced.

    Additional processing costs are costs incurred by each product, after they
    emerged from the same raw materials. Additional processing costs also
    consist also of additional materials, direct labor and manufacturing
    overhead incurred after the split-off point.

    B Joint
    Products
    Start Joint Costs Split Off Point C
    (Materials + Labor + Overhead)
    METHODS OF ALLOCATING JOINT COSTS

    • The physical measures method


    • The sales value at split-off point
    • The adjusted sales value method

    Case 1:

    Jose’s Dairy Products purchases raw milk from individual farms and processes it
    until the split-off point, when two products- cream and liquid skim- emerged. These
    two products are sold to a company, which markets and distributes them to
    supermarket and other retail stores.
    Summary data for April 2020 are:
    • Raw milk processed, 55,000 gallons; 5,000 gallons are lost in the production due
    to evaporation, spillage and the like, yielding 12,500 gallons of cream and 37,500
    gallons of liquid skim.
    • The production data and sales and inventories are presented in the next slide.
    PHYSICAL MEASURE METHOD
    SALES VALUE AT SPLIT-OFF POINT METHOD
    ADJUSTED SALES VALUE METHOD

    Case 2:
    Assume the same data as in case 1 except that both cream and liquid skim can be
    processed further.
    • Cream to whipping Cream: 12,500 gallons of cream are further processed to yield
    10,000 gallons of whipping cream at additional processing costs of P140,000.
    Whipping cream sells for P25 per gallon.
    • Liquid skim to Condensed Milk: 37,500 gallons of liquid skim are further processed
    to yield 25,000 gallons of condensed milk at additional processing costs of
    P260,000. Condensed milk sells for P22 per gallon.
    Sales during the period were 6,000 gallons of whipping cream and 22,500 gallons of
    condensed milk. The ending inventories are as follows:
    ________________________________________
    Raw milk 0 gallons
    Cream 0 gallons There are no beginning
    Liquid skim 0 gallons inventories
    Whipping cream 4,000 gallons
    Condensed milk 2,500 gallons
    _____________________________________
    Milky Production purchases raw material C from suppliers and
    process it until split-off point to produce Products A and B.
    Below is the summary of production.

    1. Using the physical measure method, allocate the joint costs.


    2. Prepare the Income Statement
    3. Using the sales value at split-off point, allocate the joint costs
    4. Prepare the Income Statement
    Product A and Product B can be processed further to produce Product
    M and Product N
    • Product A can produce 15,000 gallon of Product M if processed
    further at an additional processing cost of P150,000 and be sold for
    P30 per gallon.
    • Product B can produce 45,000 gallons of product N if processed
    further at an additional processing cost of P200,000 and be sold for
    P20 per gallon.

    During the period 10,000 gallons of Product M and 30,000 gallons of


    Product N were sold.

    1. Determine the production cost per gallon of Products M and N.


    2. Prepare the income statement

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