Extra: JOINT PRODUCTS

Question 1

What is a joint product and a by-product?

Answer 1

• Joint products are two or more products that get produced simulatnsouly because they have a common production process, THAT HAVE a sufficiently high sales value that they would be considered as a main product
• By-products are products that is a minor result of a productiom process that outputs this product incidnently while manufacturing the main products

Question 2

What are the methods of allocation costs incurred while producing joint products?

Answer 2

• Sales Value method
• Calculate the aggregate of all the Sales values and then weight then
• Then multiply the total cost incurred against their weightings
• physical units method
• Calculate the aggregate number of units you produced, of every product all together
• Divide the costs between the products according tk their weightings in total units
• Net reslisable value method
  *Calculate the aggreate net reslisable value on the goods {(units x (selling price of unit - Fuether processing costs) + the same for all other products}
• Weight them according to the total sales arising from each product
• allocate the costs of production according to that weighting
• estimating final gross margins of resulting products
  *

Question 3

What are the advantageous and disadvantageous of the sales value method?

Answer 3

Advantageous
- it measures the value of the joint product immediately
- it uses a meaningful basis
- it is simple to use

Disadvantageous
- it does not anticipate subsequent management decisions

Question 4

What are the advantageous and disadvantageous of the physical units method?

Answer 4

Advantageous
• It is a simple and easy method for
understanding and application.
• It is technically sound.

Disadvantageous
• It is unequitable to allocate joint costs on
the basis of physical weight without
consideration of its sale value
• If the output cannot be expressed in
physical quantities, this method cannot
be applied.
• Similar allocation will be made to all joint
products irrespective of its quality.

Question 5

What is the accounting treatment for By- products?

Answer 5

• the costs incurred in the process are shared between the joint products and not with the by products (including costs like normal loss)
• the money we can get for the by products is treated as a reduction in costs and not an income
• this is the case even if further processing is performed on the by products to make higher income from it