Unformatted text preview: become individually identifiable.
become individually identifiable.
Dr. Hussein Khasharmeh
Dr. Hussein Khasharmeh Any costs beyond the splitoff point are separable Any costs beyond the splitoff point are separable costs because they are not part of the joint process costs because they are not part of the joint process and can be identified with individual product.
and can be identified with individual product. Joint costs: are the costs of manufacturing
Joint costs: are the costs of manufacturing
joint products before the splitoff point..
joint products before the splitoff point Dr. Hussein Khasharmeh
Dr. Hussein Khasharmeh Example, suppose Dow Chemical Company Example, suppose Dow Chemical Company produces two chemical products, X and Y, as a produces two chemical products, X and Y, as a result of a particular joint process.
result of a particular joint process. The joint processing cost is $100,000
The joint processing cost is $100,000 (this includes rawmaterials cost and (this includes rawmaterials cost and processing costs) before the joint products processing costs) before the joint products X and Y reach the splitoff point..
X and Y reach the splitoff point
Both products are sold to the petroleum
Both products are sold to the petroleum
industry to be used as ingredients of gasoline..
industry to be used as ingredients of gasoline
Dr. Hussein Khasharmeh
Dr. Hussein Khasharmeh The data for Joint Product Costs are:
1 million liters of X at a
1 million liters of X at a
selling price of $.09/liter = $90,000
selling price of $.09/liter = $90,000
500,000 liters of Y at a
500,000 liters of Y at a
selling price of $.06/liter = $30,000
selling price of $.06/liter = $30,000 Jointprocessing
Jointprocessing
cost is $100,000
cost is $100,000 Sell at splitoff point
Total sales value at
Total sales value at
splitoff is $120,000 (90,000+30,000))
splitoff is $120,000 (90,000+30,000
Dr. Hussein Khasharmeh
Dr. Hussein Khasharmeh Illustration of Sell or Process Further
Suppose the 500,000 liters of Y can be processed further
Suppose the 500,000 liters of Y can be processed further and sold to the plastics industry as product YA. and sold to the plastics industry as product YA. The additional processing cost would be $.08 per liter for The additional processing cost would be $.08 per liter for manufacturing and distribution, a total of $40,000 (500,000 X 0.08).
manufacturing and distribution, a total of $40,000 (500,000 X 0.08).
The net sales price of YA would be $.16 per liter, a total of The net sales price of YA would be $.16 per liter, a total of $80,000 (500,000 X0.160). Should the company process further
$80,000 (500,000 X0.160). Should the company process further product (Y) and then sold it or sell it at splitoff point. product (Y) and then sold it or sell it at splitoff point. Dr. Hussein Khasharmeh
Dr. Hussein Khasharmeh Illustration of Sell or Process Further
Sell at
Splitoff
as Y Revenues
Revenues
Separable costs
Separable costs...
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 Spring '13
 Dr. Hussein Khasharmeh

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