Supp_Notes re Allocation of Joint Costs_05

Supp_Notes re Allocation of Joint Costs_05 - CMA2 -...

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CMA2 - Supplementary Notes: Cost Allocation: Joint Products and By Products 1. Definitions a. Joint Cost : the cost of a single process that yield multiple products simultaneously. Includes DM, DL, and mfg. Ohd up to the split-off point b. Split-off Point : the point in the process at which the products become separately identifiable. c. Separable Costs : those costs incurred beyond the split-off point that are identifiable with individual products d. Main Product : the product with the highest sales value relative to other products beyond split-off e. Joint Products : other products with a relative high sales value that are not identifiable as individual products until the split-off point f. Byproduct : a product beyond the split-off point with a relatively low sales value in comparison with main and joint products g. Scrap : products beyond split-off with minimal value (May have a negative sales value if must be hauled away to a landfill) 2. Reasons for Allocating Joint Costs to Individual Products a. To value inventory and COGS for external reports b. To value inventory and COGS for internal reports (including profitability analysis and performance evaluation) c. For cost reimbursement under contracts where not all the separable products go to a single customer so that allocation of the joint costs is necessary. d. For settlement of insurance claims involving separable products at or beyond split-off. e.
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Supp_Notes re Allocation of Joint Costs_05 - CMA2 -...

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