Join and By Products Flashcards
what are joint costs
until the point where the different products can be separately identified all conversion work leading up to this point will be common to all products
how are joint costs allocated between joint products and by-products
joint costs are shared between the joint products only, the by-products are not allocated any costs
are by-products allocated any costs
no
what is the sales value of by-products used to do
the sales value (if any) of the by-product is used to reduce the joint costs before they are apportioned to the joint products
what does NRV stand for
net realisable value
what is net realisable value
selling price less further processing costs, not including joint costs
hopefully you will be planning to do the exercise lectures and stuff again to get you to learn the layouts if so then do elq7 to learn format for profit and loss sheet with nrv and joint costing shit
yeah
what is the difference between joint costing and job costing
Job costing is used for unique products, and process costing is used for standardised products
what are the differences between joint costing and job costing
job costing for unique products process for standardised,
job costing v small production runs process for large,
more record keeping required for job costing process aggregates costs so requires less record keeping,
costing more likely for billings to customers so jobs that would have that
also need to remember that you haven’t done a lot of the explain questions for the exercise lectures so when you have all the cards studied would be useful to go back over them
should be done writing cards soon
what is JIT
just in time principles
what are the just in time (JIT) principles
dedicated to removal of waste and non value adding activities,
careful planning of delivery and production schedules so stock levels of raw material and WIP are minimised
what are the benefits of just in time
manufacturer can move from production of one good to another easily because production runs are short,
eliminates warehouse storage needs,
spend less money on raw materials cause just buy enough to make the products and no more
what are the disadvantages of just in time
disruptions in the supply chain,
if supplier has breakdown or cannot deliver goods on time then can shut down entire production process,
sudden order that surpasses expectation can delay delivery of finished products to clients
what do you do with the cost savings from the by product
take it off the cost of the production for product that is made where the by product comes from
how do you allocate the joint costs based on NRV *
find the NRV of each of the products by doing sales minus own costs and then apportion the joint costs based on the fraction of NRV that that product has (example back 10 notes)
what are the advantages of doing the NRV joint costing method rather than allocating based on volume
NRV takes into account market prices in addition to quantities,
volume sometimes allocates too much of the cost to high volume products which then appear loss making
how do you decide what combination of products to do when given scarce resources
make it into a maximisation problem by formulating the unknowns into inequalities
what are dual values/shadow prices *
change in the objective function which occurs for a unit change in the constraint,
effectively opportunity costs (TQ7 understand this)
should you draw a graph when doing scarce resources analysis *
yes (TQ7)
how do you find the optimal allocation for products doing scarce resource analysis *
draw a graph with all the constraints on it,
use the objective function as a generic line, then float it to an optimum location within the feasible set (TQ7)
why is the shadow price useful
useful for incremental decisions when management needs to know the benefit associated with the cost of extending the usage of a resource
how do you find the shadow price of something (labour hours for example) that is fully utilised in the optimal solution *
work out what the new optimal solution is if you increase that parameter by 1, then compare the total contribution to before and that is the shadow price of that good (TQ7 part c, back 11)
how do you calculate the shadow price of something that is not fully utilised in the optimal solution *
since not fully utilised in the optimal solution, having one extra hour available would not generate any extra contribution so the shadow price is zero (TQ7 part c, 12)
