chapter 6 Flashcards
joint costs
costs of a production process that yields multiple products simultaneously. exist of the input costs (materials) and joint processing costs.
split-off point
the juncture in the process when one or more products in a joint-cost setting become separately identifiable.
separable costs
costs incurred beyond the split-off point that are assignable to one or more individual products.
product
any output that has a positive sales value.
joint products
all have relatively high sales value but are not separately identifiable as individual products until the split-off point.
main product
the product with a relatively high sales volume when a single process is yielding two or more products.
by-product
has a low sales value compared with the sales value of the main or joint product(s).
scrap
has a minimal sales value.
sales value at split-off method
allocates joint costs based on the relative sales value at the split-off point of the total production in the accounting period of each product. costs are allocated to products in proportion to their ability to contribute revenue (benefits-received criterion of cost allocation).
physical measure method
allocates joint costs based on their relative proportions at the split-off points, using a common physical measure. the physical weights used may have no relation to the revenue-producing power of the individual products. therefore, this method is less preferred because of the benefits-received criterion.
estimated net realisable value (NRV) method
allocates joint costs based on the relative estimated net realisable value, which is the expected final sales value minus the expected separable costs of production and marketing of the total production of the period.
constant gross-margin percentage NRV method
allocates joint costs in such a way that the overall gross-margin percentage is identical for all the individual products.
