Joint And By-Product Costing Flashcards

1
Q

What is a joint process?

A

A process where more than 1 product is produced.

Example: Raw milk produces milk, butter, cheese, etc.

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2
Q

What is a split off point?

A

The point at which joint products are distinguishable

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3
Q

What is a by-product?

A

Product in a joint process which has a minor sales value in relation to other joint products. (often different from the original materials)

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4
Q

What is scrap?

A

Raw materials left over at the end of the process

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5
Q

What is Waste?

A

Unlike by-product or scrap, it has no value.

May even have to be disposed of at a cost.

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6
Q

What is the accounting treatment of by-products and scrap?

A

No joint costs are allocated and proceeds on sale are set off against the joint process costs.

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7
Q

What is the accounting treatment of WASTE?

A

Waste is not allocated any joint costs.

If costs are involved in getting rid of waste, these should be added to the joint cost and allocated to joint products

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8
Q

What is the physical measures method?

A

Joint costs are allocated to joint products on the basis of the volume of output of each joint product

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9
Q

What is a disadvantage of the physical measures method?

A

Where market prices differ, allocating the same costs to all products could result in widely varying product profitability.

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10
Q

What is the market value at split-off point method?

A

Allocates joint costs based on the estimated sales value at the point where they first become identifiable

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11
Q

What is the net realizable value method?

A

Certain products require further processing, either because they are not ready at split-off or because it increases profitability.
They may then be apportioned in relation to the final selling price less cost of further processing

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12
Q

What is the main advantage of NRV method?

A

Inventory will always be recorded at an amount which is below its NRV.

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13
Q

What is the constant growth % method?

A

Allocate so that each joint product yields the same gross profit percentage. (relationship between sales value and cost incurred for each product is the same)

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