cOST ACCY Chapter 16 Outlines

cOST ACCY Chapter 16 Outlines - Chapter Outlines- CHAPTER...

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Chapter Outlines- CHAPTER 16 JOINT PRODUCTS AND BY PRODUCTS A. Cost Management Challenges. There are two questions asked in this chapter. 1. How do cost managers anticipate and resolve potential conflicts between joint-product and process decision making and external reporting? 2. If joint-cost allocations are arbitrary, does that mean they are meaningless? B. Learning Objectives – This chapter has 5 learning objectives. 1. It teaches how to use cost management information to increase profits from using scarce resources of joint production processes. 2. It demonstrates how to use cost-management data in the sell-or-process further decision. 3. Chapter 8 presents explanations of the net-realizable-value and physical-measures joint cost allocation methods. 4. The chapter explains the differences between the joint-cost methods and why one way or the other may be preferred. 5. It shows how to account for by-products. C. In order to understand joint processes and joint products, there are five terms to understand. 1. A joint process is some common set of inputs or activities that result in two or more products. The cost of the inputs/activities must be allocated to the separate products because they represent part of inventory costs for different inventory items. In Chapter 6, where job costing was explained, there were many costs that could be traced directly to one unit of product because each job represented a unit of product. Costs that were not directly related to a particular job had to be allocated. ___ In Chapter 7, process costing was described as an appropriate costing method when every unit of product is homogeneous. The types of products that occur in a joint process environment are dissimilar from each other, yet a significant portion of the cost cannot be directly traced to any one of the two or more products being produced. ___ Joint processes create a different type of cost assignment problem. One input or process is used to create two or more types of output. The costs that result from the joint process must be allocated to the joint products because the costs are production costs, which must be inventoried, and eventually included as part of cost of goods sold. 2. Joint products are the result of a joint process. That is, two or more outputs result from the common set of inputs. Since the joint process cannot be split into the portions that each product causes separately, allocation of joint costs is used to assign these costs.
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3. Joint costs (or joint-process costs) are costs that arise from the common set of inputs. These are the costs that must be allocated among the joint products. Joint costs occur before the joint products emerge as separate, distinguishable products. Joint costs use batch and facility-level resources. 4.
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This note was uploaded on 05/04/2011 for the course ACCY 121 taught by Professor Fagan,k during the Spring '08 term at CSU Sacramento.

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cOST ACCY Chapter 16 Outlines - Chapter Outlines- CHAPTER...

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