JOINT AND BY-PRODUCTS

NOTES

Joint products are those that have separate significant values, produced using the same raw
materials and in the same manufacturing process.
Soy beans = Soy bean meat and Soy bean oil

These have physical relationship that requires simultaneous common processing. This is
where joint costs of the products have to be allocated. Manufacturing these always have a
certain split-off point from where products are either sold or processed further. Costs after
split-off point do not cause accounting problems.

Additional costs before split-off = increase in amount or DM DL and OH

Additional costs after split-off = separable clause attributable to respective product

Outputs of Joint Products

Joint products or main products = from the initial process, generate revenue
By-product or scrap = products incidental to the joint process

Accounting
A method should be used to allocate joint costs to joint products
M1 Physical output method/Average unit cost method = based on volume of production

M2 Market value at split-off method = market value at split-off

-SP ng products

M3Net realizable value method = NRV of products

-approximated market value at split-off
-MV less disposal costs
-Total MV – (Addt’l Costs + Disposal Costs)

1. See kung anong method gagamitin.

2. Compute for the total M1, M2, M3 nung products.
3. Prorate si M1, M2, M3 sa amount given for joint costs.
4. Share in JC + Additional Processing Costs = Total Production Costs

Variations in the Method

Market Value using percentage
Total ni JC / Total ni MV = Percentage ng JC sa Total MV
^iisang % lang sa lahat ng products then makukuha pa rin si JC kasi yun nga yung % ng
JC hahaha ano raw

Average unit cost method

Total ni JC / Total Units Produced = Average unit cost
^ito na lang imumultiply sa number of products para mag come up sa JC

See illustrations sa excel file.

Accounting for by-products

Category 1
-minor consideration lang kay by product
-walang separate inventory account for such
-simply deduct/add yung net revenue from by product dun sa required income
statement presentation
Other income
Additional sales revenue
Deduct sa COGS
^observation is same lang si Net Income lagi maali man ang ginamit for this

Category 2
-significant and important si by product
-pwede mag-allocate sa kanya ng JC
-by product is a deduction to the production of main products produced
-by product net revenue is reduced sa total production costs
Net Realizable Method
Reversal Cost Method