Joint products are two or more products that are generated within a single production process. They can’t be produced separately and will incur undifferentiated joint costs. Show
Joint products can’t be separated until a specific ‘split-off point’ or ‘separation point’. From this point onwards, the two products can be processed individually. Examples of join products include:
Joint products, by-products, and spoilageTo be considered a joint product, each product must be of roughly equal economic importance. If the two products have considerably different market values, the more valuable product is considered the main product, and the secondary product is known as a by-product. If the secondary product has no saleable value, it’s considered spoilage, waste or scrap. Joint products vs. co-productsCo-products are a type of product produced in different varieties. Co-products may require a different type of raw material and may be processed in different ways, but they’ll use the same facilities. For example, a company specialising in furniture manufacturing may produce tables, chairs, desks and benches – these would be considered co-products. Co-products are not the same as joint products. Co-products can be produced in different quantities without affecting the production of other co-products. On the other hand, joint products can only be produced together, so adjusting levels of production for a joint product will affect production for the other product. Allocating costs for joint productsThe costs incurred in the production of joint products are undifferentiated until the specific split-off point. After this split-off point, costs are allocated to individual products. There are two ways to allocate joint costs. The first approach allocates costs based on estimated gross margins; the second approach allocates costs based on the sales value of the products. Costs allocated by gross marginsYou can allocate joint costs based on the products’ gross margins. Using this method, you should: 1) Calculate the total processing cost for each joint product after the split-off point 2) Subtract this amount from the total revenue that each product will earn If it’s not possible to determine the sale price of each product at the split-off point, the gross margin method may be the only option. Costs allocated by sales valueTo allocate joint costs based on the products’ sales value, you should: 1) Calculate the total production costs up until the split-off point – this might include direct labour costs, as well as raw materials and overheads 2) Determine the sales price and volume of all of the resulting products 3) Calculate the relative sales value of each product – the total value of sales for each product, divided by the overall revenue generated by the joint products 4) Assign the joint costs according to the relative sales value What guideline should be used in determining whether a joint product should be sold at the split-off point or processed further?  Students who’ve seen this question also like: Related Accounting Q&AFind answers to questions asked by students like you. Q: a) Briefly describe the treatment of Joint Costs when making a sell-or-process-further decision. A: Note: We’ll answer the first question since the exact one wasn’t specified. 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How does the product cost of a… A: Answer to Question: Product Cost:- The cost that can be apportioned to the product is known as… What guidelines should be used in determining whether a joint product should be sold at the splitdecisions about whether or not to process further should be made on the basis of incremental revenue (final sales value after further processing less the sales value at the split-off point) less incremental cost (the cost of processing further).
What factors should be considered when determining the allocation of joint costs?How to Allocate Joint Costs. Allocate based on sales value. Add up all production costs through the split-off point, then determine the sales value of all joint products as of the same split-off point, and then assign the costs based on the sales values. ... . Allocate based on gross margin.. What is the splitA split-off point is the location in a production process where jointly manufactured products are henceforth manufactured separately; thus, their costs can be identified individually after the split-off point. Prior to the split-off point, production costs are allocated to jointly manufactured products.
What method is most commonly used for allocating joint processing costs to joint products explain?The two major methods of allocating joint costs are (1) the net realizable value method and (2) the physical quantities method. The net realizable value method allocates joint costs to products based on their net real- izable values at the split-off point.
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What guidelines should be used in determining whether a joint product should be sold at the split
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