Acc550-ch 16 - ACC550 CHAPTER 16 JOINT PRODUCTS AND...

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CHAPTER 16 JOINT PRODUCTS AND BYPRODUCTS Joint production processes 1) These are production processes that yield multiple products simultaneously in the same process. 2) Outputs of a joint production process are: a) Main product b) Joint products c) Byproducts 3) Output classification is dependent on the sales value of the output a) Main product i) When only one output has a high sales value, that output is called a main product. ii) All other outputs have low or no sales value. b) Joint products i) When two or more outputs have high sales values, those outputs are called joint products. ii) No main product exists. iii) All other outputs have low or no sales value. c) Byproducts i) Byproducts represent outputs that have low sales values. ii) Joint products or a main product will exist. d) Outputs with NO sales value are not recorded as inventory i) No costs are assigned to inventory units with $0 sales value. ii) This treatment is consistent with the rules for reporting inventory at the lower of cost or market value. 4) Split off point a) This is the point in a joint production process where outputs become separately identifiable. 5) Joint costs a) Joint costs represent manufacturing costs that occur up to the split off point. b) Joint costs must be allocated to the individual products in a joint production process. 6) Separable costs a) Separable costs represent manufacturing costs that occur after the split off point. b) Separable costs can be separately assigned to individual products; no joint allocation is required. Expanded discussion The manufacturing processes that we studied in prior chapters assumed that one product was produced at a time. In this chapter, we study manufacturing processes where two or more products are produced simultaneously. The textbook gives several examples of products produced in joint production processes. As with any product, we need to assign costs to inventory units. Our dilemma is that the inventory units are not distinguishable from each other during some of the manufacturing process. The point in the manufacturing process at which the units become separate or distinguishable from each other is called the split off point. Costs incurred before the split off point are joint costs. Joint costs must be allocated to the individual products being jointly produced. Due to the simultaneous production, joint costs cannot be assigned to individual products using a cause and effect criterion…all individual products in a joint production process cause, or drive, joint costs. Instead, we use a benefits received criterion. The different methods used in industry to allocated joint costs are discussed in the next section. 1
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Acc550-ch 16 - ACC550 CHAPTER 16 JOINT PRODUCTS AND...

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