ch16 slides

ch16 slides - 16 1 Cost Allocation Joint Products and...

Info iconThis preview shows pages 1–16. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 16 - 1 Cost Allocation: Joint Products and Byproducts Chapter 16 16 - 2 Joint Cost Basics ● Joint Costs Costs of a production process that yields multiple products simultaneously. ● Split-off Point The juncture in the production process where the two (or more) products become separately identifiable ● Separable Costs All costs (mfg, mktg, distribution) incurred after the splitoff point that are assignable to each of the specific products identified at the split-off point. 16 - 3 Joint-Cost Basics Joint products High sales value Joint costs Costs that yield multiple products Separable costs All costs beyond the splitoff Point assignable to each of the specific products identified at the split-off point Splitoff point Point where products become separately identifiable Byproduct Low sales value 16 - 4 Joint-Cost Basics Raw milk Cream Liquid Skim 16 - 5 Joint-Cost Basics Coal Gas Benzyl Tar 16 - 6 Distinguish joint products from byproducts. 16 - 7 Joint Products and Byproducts Sales Value High Low Main Products Joint Products Byproducts 16 - 8 Why joint costs should be allocated to individual products. 16 - 9 Why Allocate Joint Costs? • to compute inventory cost and cost of goods sold • to determine cost reimbursement under contracts • for insurance settlement computations • for rate regulation • for litigation purposes • understand product(s) profitability 16 - 10 Allocate joint costs using four different methods. 16 - 11 Approaches to Allocating Joint Costs Approach 2: Physical measure Approach 1: Market based Two basic ways to allocate joint costs to products are: 16 - 12 Approach 1: Market-based Data 1. Sales value at splitoff method • Allocates joint costs based on relative total sales value at split-off point 2. Net realizable value (NRV) method • Allocates joint costs to joint products based on the relative NRV--final sales value less separable costs of the total production of the joint products 3. Constant gross-margin percentage NRV method • Allocates joint costs to products so the gross margin for the individual products is identical 16 - 13 Allocating Joint Costs Example 10,000 units of A at a selling price of $10 = $100,000 10,500 units of B at a selling price of $30 = $315,000 11,500 units of C at a selling price of $20 = $230,00 Joint processing cost is $200,000 16 - 14 Allocating Joint Costs Example Based on Sales Value A B C Total Sales Value $100,000 $315,000 $230,000 $645,000 Allocation of Joint Cost $100 ÷$645 31,008 $315 ÷$645 97,674 $230 ÷$645 71,318 200,000 Gross margin $ 68,992 $217,326 $158,682 $445,000 % 69% 69% 69% 69% At split-off point 16 - 15 Sales Value at Splitoff Method Example Assume all of the units produced of B and C were sold....
View Full Document

This note was uploaded on 04/05/2008 for the course ACCT 451 taught by Professor Stangota during the Spring '08 term at Rutgers.

Page1 / 55

ch16 slides - 16 1 Cost Allocation Joint Products and...

This preview shows document pages 1 - 16. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online