Joint costing Flashcards
Joint costs
The costs of production process that yields multiple products simultaneously.
Main product
Product with a high sales value compared to that of the other products.
Joint products
Two or more products with a high sales value compared to that of any other products
By products
Product with low sales values compared to that of the other products.
Split-off point
Point in process when products become separately identifiable.
Separable costs
Costs incurred beyond the spilt-off point belonging to the individual joint product.
Physical measure approach
Allocate using tangible attributes of the products, such as weight, quantity, or volume of the joint products.
Market based approach
Allocate using market-derived data (dollars):
1. Sales value at split off method.
2. Estimated NRV method
3. Constant gross-margin % method
Physical-measure method
Allocates joint costs to joint products on the basis of a comparable physical measure.
Physical measures advantages
- Simple
- Don’t need to know about further processing.
Disadvantages
- Need a common unit
- No relationship to revenue-producing power of products.
Sales Value at split off method
Allocates joint costs to joint products on the basis of the relative total sales value at the split off point.
Sales value at split-off advantages
- In relation to revenue-producing power of products.
- Don’t need to know about further processing.
Popular method
Sales value at split-off disadvantages
- Need to have saleable products at split-off point
- Difficult as selling price is volatile.
Estimated NRV method
Allocates joint costs to joint products on the basis of relative NRV.
