Joint and By Products

Question 1

What is a Joint Product?

Answer 1

When multiple products are produced by the same process and each have a significant sales value.

Question 2

What is the split off point?

Answer 2

The point in the production process where the joint and by products become individual identifiable products. All costs incurred up until the split off point are known as joint costs.

Question 3

What are by products?

Answer 3

An incidental output of the production process, not the primary focus of the process e.g. shavings in a sawmill.

Question 4

How do you account for by product revenue?

Answer 4

1. Show as a separate revenue.

2. Reduce the costs of the main product by the revenue.

Question 5

Methods to apportion joint costs:

Answer 5

1. Physical measure = in proportion to volume.
2. Sales Value at split off = in proportion to sales.
3. Estimated NRV = in proportion to NRV, take further processing costs from sales.
4. Constant growth margin = allocate costs based on growth margin. Work backwards. Joint costs are the balance.