n122 - Chapter 13-2 Notes Page 1 Joint Products Accounting...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 13-2 Notes Page 1 Please Send Comments and Corrections to me at mconstas@csulb.edu Joint Products Accounting For Joint Product Costs Joint Products and By-Products are produced from one production process (Joint Process). There are no separate products until after the Joint Process is completed. For example, on a dairy farm, the raw milk is processed into a number of Joint Products: milk, cheese, cream, butter and other dairy products. Similarly, in a slaughter house operation, one cow produces a number of Joint Products: leather and various cuts of beef. Additionally, in a petroleum refining process, crude oil is processed into such Joint Products as gasoline, kerosene, heating oil, and lubricating oil. The point at which you can identify the Joint Products as separate products is referred to as the Split-Off Point (e.g., after churning the milk). Joint Products are the main products produced from the Joint Process (determined by value and/or quantity). By-Products, on the other hand, are outputs from the Joint Process that are relatively minor in quantity and/or value. For example, the parts of the cow that humans do not ordinarily eat are considered By-Products (e.g., dog food and animal feed). They have a value, but we did not raise the cow in order to get these parts (e.g., the heart and brains). The differentiation between Joint Products and By-Products is a subjective determination, and there is no objective test to distinguish between Joint Products and By-Products. Also, the characterization of a product as a By-Product or Joint Product can change as circumstances change. For example, sawdust and wood chips used to be characterized as By-Products. Now, with the increased popularity of particle board, they are characterized as Joint Products. The production costs up to the Split-Off Point are called Joint Costs. For example, the cost of raising and milking a cow is a Joint Cost in a diary operation. Because there were no separate products at the time that the Joint Costs were incurred, it is not clear which Joint Costs should be allocated to which Joint Products. In practice, a number of different methods are used to allocate Joint Costs to the Joint Products. It is preferred to base the allocation of Joint Costs to Joint Products using the relative fair market values of the Joint Products. The rationale for this preference is that we entered into the Joint Process more for the higher value Joint Products than the lower value Joint Products, and the allocation of Joint Costs should reflect this. For example, it is likely that a cow was raised more for its steaks than for its hamburger. We will discuss three
Background image of page 1

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

View Full DocumentRight Arrow Icon
Chapter 13-2 Notes Page 2 Please Send Comments and Corrections to me at mconstas@csulb.edu
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/13/2012 for the course ACCT 201 taught by Professor John during the Fall '08 term at CSU Long Beach.

Page1 / 6

n122 - Chapter 13-2 Notes Page 1 Joint Products Accounting...

This preview shows document pages 1 - 3. Sign up to view the full document.

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