Lecture 4_ Joint Product Costing_Complete_6perpage

Lecture 4_ Joint Product Costing_Complete_6perpage -...

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ACCT3104 Managerial Costing and Control Lecture 4 Cost Allocation II – Joint Product & By-product Costing Reading: Chapter 16 2 Lecture Outline ± Definitions ± Joint Cost Allocation ² Physical Measure method ² Sales Value method ² Net Realisable Value (NRV) method ² Constant Gross Margin NRV method ± Sell or Process Further Decision – relevant information? ± Accounting for By-products ² Production Method – byproduct inventory recognized at time of production ² Sales Method – byproduct revenue recognized at time of sale Market based methods 3 ± Process Costing - Single output – for one or more processes ² requires accumulation of costs from one process to the next to determine the full product cost ± Joint (product) costing ² one or more of the processes is a Joint Process ie., process output is ± more than one type of product ie., joint products and ± where individual products are not identifiable until the end of the process ie., split-off point Introduction Process 1 Eu Cost =$4 Process 2 Eu Cost =$6 Process 3 Eu Cost =$8 4 Joint Products Joint Input Common Production Process Separate Processing Separate Processing Final Sale Final Sale Final Sale Split Split -Off Off Point Joint Costs Costs Separable Costs Oil Petrol Chemicals Separable Separable Costs Costs Intermediate Intermediate products 5 Joint Costs - Definitions ± Joint Costs ² Costs of a single production process that yields two or more products simultaneously simultaneously ± Split-Off Point ² The point in a joint production process where the individual products (output) become separately identifiable ± Separable Costs ² All costs incurred beyond the split-off point on the now identifiable specific products ( ie., the cost of subsequent processes) ± Total Costs = Joint costs + Separable costs 6 Joint Products and By-products ± Product Product – any output with a positive sales value any output with a positive sales value ± Joint products – are two or more products that have relatively high sales value high sales value at the split-off point. ± Main product is the output of a joint production process that yields one product with a high total sales value compared to the sales values of all other products of the process. ± By By -products products are incidental products of a joint production process that results from the processing of another product. ² A by-product has a relatively low sales value relatively low sales value compared to the sales value of other products (main or joint). ± Intermediate product - product transferred from one subunit to another. ± Note: the relative values and therefore definition and treatment may change over time
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7 Main Products vs By-Products Joint Input Common Production Process Split-Off Point Joint Costs By-products Joint Product Relatively low value or quantity when compared to main/joint product/s Joint Product Do not allocate joint costs to by-products!
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This note was uploaded on 08/27/2009 for the course BUSINESS ACCT3104 taught by Professor Sandra during the Spring '09 term at École Normale Supérieure.

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Lecture 4_ Joint Product Costing_Complete_6perpage -...

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