Lecture_1D_Chapter_6_Joint_and_by-product_costing

Lecture_1D_Chapter_6_Joint_and_by-product_costing - Part...

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Use with Management and Cost Accounting 9e by Colin Drury ISBN 9781408093931 © 2015 Colin Drury Part Two: Cost accumulation for inventory valuation and profit measurement Chapter Six: Joint and by-product costing 1 Lecture 1D Slides 1- 12
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Use with Management and Cost Accounting 9e by Colin Drury ISBN 9781408093931 © 2015 Colin Drury 6.1 1. Joint products are not identifiable as different individual products until split- off point. Therefore, joint costs cannot be traced to individual products. 2. By-products emerge incidentally from the production of the major products and have relatively minor sales value. 2
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Use with Management and Cost Accounting 9e by Colin Drury ISBN 9781408093931 © 2015 Colin Drury 6.2a Example of joint cost apportionments Joint costs for the period £60 000 Output and sales X = 4 000 units at £7.50 Y = 2 000 units at £25 Z = 6 000 units at £3.33 There are no further processing costs after split-off point. 3
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Use with Management and Cost Accounting 9e by Colin Drury ISBN 9781408093931 © 2015 Colin Drury 6.2b 4
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Use with Management and Cost Accounting 9e by Colin Drury ISBN 9781408093931 © 2015 Colin Drury 6.3 Net realizable value (NRV) method • Where further processing costs are incurred, sales values at split-off point may not be available. • Further processing costs are deducted from sales value to estimate NRV at split-off point. 5
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Use with Management and Cost Accounting 9e by Colin Drury ISBN 9781408093931 © 2015 Colin Drury 6.4 Constant gross profit percentage method Based on the assumption that the gross profit should be identical for each product. • Joint costs are therefore allocated so that the gross profits at split-off point are identical for each product. • Using the example on sheet 3 and assuming that joint costs are £60 000 the gross profit is £40 000 (£120 000 sales less £80 000 total costs). Therefore, the total gross profit is 33.33%.
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  • Summer '13
  • student
  • Revenue, Colin Drury, Colin Drury ISBN

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