ACC 122: Cost Accounting and Control

Student Activity Sheet Module # 22

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

Lesson title: Accounting for Joint and By-products Materials:

Lesson Objectives: Textbook, SAS, & calculator
At the end of this module, I should be able to References:
1. Identify the characteristics of the joint production process. Hansen & Mowen; Cost
2. Allocate joint costs to the product using different allocation Accounting&Control; 2019 Edition
Pedro P. Guerrero
methods. Practical Accounting 2

Productivity Tip:
Before sleeping tonight, recite three important terms you learned today.

A. LESSON PREVIEW/REVIEW

1) Activity 1 : Introduction/Review (3 mins)

Hello there! Before you begin the topic let us have a quick review from the
previous module.

1. A department that would be classified as a producing department is

a. Baking. c. General Factory
b. Cafeteria d. Machine Maintenance

2. The method for allocating service department costs that requires the least clerical
work is::
a. Sequential Method c. Direct Method.
b. Reciprocal Method d. Step-up Method

3. The following are steps in allocating support department costs to producing

departments, except
a. Decentralize the firm.
b. Classify each department as a support department or a producing
department
c. Trace all overhead costs in the firm to a support or producing department
d. Allocate support department costs to the producing departments

4. Major objectives of cost allocation of support department costs to producing

departments identified by the Institute of Management Accountants (IMA) are the
following, except
a. Compute product-line profitability
b. Value inventor
c. Unification of support and producing departments
d. Predict the economic effects of planning and control
5. Pools all costs in one cost pool with the same rate per unit of the single allocation
base appear to be in their own best interest
a. Single rate method.
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 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 22

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

b. Dual rate method

c. Reciprocal allocation method
d. Incremental Cost-Allocation method

2) Activity 2 (LO1& LO2): What I Know Chart, part 1 (3 mins)

Alright! Let’s see what you already know, answer the first column (What I know).
Leave the third column (What I Learned) blank at this time.
What I Know Questions What I Learned (Activity 5)
Describe the Joint Production
Process.

Explain Split-off point.

What are the differences between

Joint Costs and Separable costs.

B. MAIN LESSON
1) Activity 3 (LO1 & LO2): Content Notes (20 mins)
Make sure to highlight or underline the important parts!
LO1: Identify the characteristics of the joint production process.

In the process of manufacturing one or more products, a company may also produce other products
which may either be joint products or by-products (this will be discussed on the next module) depending
upon their importance to the firm.

Joint Products are the two or more products produced simultaneously by the same process up to a
“split-off” point. The Split-Off Point is the point at which the joint products become separate and
identifiable.

Joint Production Process

Split-Off Pork Meat

Point
Raw Material:
Hog Processing

Hides/Skins

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 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 22

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

Joint costs are costs incurred in a joint process. Joint costs may include direct material, direct labor,
and overhead costs incurred during a joint production process.

Separable Costs

Further
Cream Buttercream
Processing
Material:
Raw Milk Processing
Further Condensed
Liquid Skim
Split-Off Processing Milk
Point

Separable Costs are any costs incurred after the split-off point in a production process that can be
assigned to specific products.

Characteristics of Joint Products

Generally, the joint products have the following characteristics:
1. The main objective of manufacturing operations is to produce joint products.
2. The sale value of all the joint products is relatively high and none of the joint products are
significantly greater in value than other joint products.
3. There is no compulsory for further processing after the point of separation. These types of joint
products are sold directly after the split off point.
4. Sometimes, the joint products may require further processing.
5. Joint products require simultaneous common processing.
6. The quality of joint products may not be maintained at the maximum.
7. The management has little or no control over the maintenance of quality of joint products.

Objectives of Joint Cost Analysis

The following are the objectives of joint cost analysis:
1. Correct collection, compilation and classification of process costs.
2. The profit or loss of joint products manufacture is determined.
3. The method or pattern of production may be determined.
4. Fixing the most profitable product mix may increase the profit.
5. The relationship between the cost and profit can be studied to fix the price of joint products.
6. The effect of increase or decrease in cost is to be found out due to increase or decrease in the
output of joint products.
7. The profitability in selling of joint products and by-products can be determined.
8. The volume of profit may also be maximized with the help of marginal contribution analysis.

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This document is the property of PHINMA EDUCATION.
 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 22

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

LO2: Allocate joint costs to the product using different allocation methods.

Accounting for Joint Product Costs

1. Relative Market (Sales) Value Method- the application of this method will depend on whether the
products are sold at the point of separation or whether to be processed further such as additional
costs are incurred as a result of additional processing.

a. Sale Value at Point of Split-off- If the products are sold at the point of separation, cost is
allocated to each product based on the relative market value at the split-off point.

Sample Illustration:
Assuming Joint Cost is amounting to P2,000.
Product Measurement Selling Price/ Sales Value @ Relative Sales Allocated
Unit Measure Split-Off Point Value Joint Costs

Pork Meat 70 kg. P200/kg P14,000 (14k/20k)=70% P1,400

Pig’s Hides 40 sq. ft. P150/sq. ft. P6,000 (6k/20k)=30% P600

Total P20,000 100% P2,000

b. Hypothetical Market Value Approach/Net Realizable Value Method (Sales Value After
Further Processing)- Joint cost is to be allocated on the basis of each product’s net
realizable value.
Net Realizable Value = Final Sales Value- Actual Cost to Complete and Sale
Sample Illustration:
Assuming the Joint cost is 8,000.
Product Sales Value Separable Costs NRV Relative NRV Allocation

Butter Cream P50,000 P12,000 (50k-12k)= P38,000 (38k/62k)= 61% P4,880

Condensed Milk P30,000 P6,000 (30k-6k)= P24,000 (24k/62k)=39% P3,120

Total P62,000 100% P8,000

Additional Note: For additional reading about joint production process and its method of allocation,
you may refer to your book, Chapter 7 pg. 342- 355. And for more discussion you may visit this link:
Joint Process: https://bit.ly/JointProcess
Joint Product Allocation : https://bit.ly/Joint_Cost_Allocation

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 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 22

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

2) Activity 4: Skill-building Activities (15 mins) SCORE: _____________

Let’s try to practice what you have learned! Check your answers against the Key
to Corrections found at the end of this SAS. Write your score on the space provided.

Part I (LO1, LO2) True or False

1. Joint costs occur before the split-off point in a production process.
2. The point at which individual products are first identifiable in a joint process is referred to as
the split-off point.
3. Joint costs include all materials, labor and overhead that are incurred before the split-off point.
4. A decision that must be made at split-off is to sell a product or process it further.
5. Net realizable value equals product sales revenue at split-off plus any costs necessary to
prepare and dispose of the product
6. If incremental revenues beyond split-off are less than incremental costs, a product should be
sold at the split-off point.
7. If incremental revenues beyond split-off exceed incremental costs, a product should be
processed further.
8. The net realizable value approach requires that the net realizable value of by-products and
scrap be treated as a reduction in joint costs allocated to primary products.
9. Net realizable value is considered to be the best measure of the expected contribution of each
product to the coverage of joint costs.
10. Not-for-profit entities are required to allocate joint costs among fund-raising, program, and
administrative functions.

PART II (LO1&LO2): Complete the following.

1. Sales revenue at split-off less disposal costs equals
______________________________. ANS: net realizable value.
2. The point at which individual products are first identifiable in a joint process is referred to
as the _____________________________. ANS: split-off point
3. A single process in which one product cannot be manufactured without producing others
is referred to as a __________________________. ANS: joint process
4. Costs that are incurred in the manufacture of two or more products from a common
process are referred to as ___________________________. ANS: joint costs
5. Costs that are incurred after the split-off point in a production process are referred to as
______________________________. ANS: separate costs

PART III (LO2): Joint Product Allocation

1. Please refer to your book and turn to Chapter 7, pg. 372:
a. Answer Exercise 7.26; and
b. Answer Exercise 7.27

3) Activity 5: What I Know Chart, part 2 (5 mins)

It’s time to answer the questions in the “What I Know Chart” in Activity 2. Write
your answers in the “What I Learned” column. Let’s see your improvement!

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This document is the property of PHINMA EDUCATION.
 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 22

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

4) Activity 6 (LO1 & LO2): Check for Understanding (15 mins)

To better test your knowledge on the topic, answer the given two problems to
enhance your learning. To check if you got it right, your teacher will provide you the key
answer. Be honest in checking your work. ☺

Problem 1 (Multiple Choice)

1. If a company obtains two salable products from the refining of one ore, the
refining process should be accounted for as a(n)
a. mixed cost process
b. joint process.
c. extractive process
d. reduction process

2. Joint costs are allocated to joint products to

a. obtain a cost per unit for financial statement purposes.
b. provide accurate management information on production costs of each
type of product
c. compute variances from expected costs for each joint product
d. allow the use of high-low analysis by the company

3. Joint cost allocation is useful for

a. decision making
b. product costing
c. control.
d. evaluating managers' performance

4. Joint costs are useful for

a. setting the selling price of a product
b. determining whether to continue producing an item
c. evaluating management by means of a responsibility reporting system
d. determining inventory cost for accounting purposes.

5. Which of the following components of production are allocable as joint costs

when a single manufacturing process produces several salable products?
a. direct material, direct labor, and overhead.
b. direct material and direct labor only
c. direct labor and overhead only
d. overhead and direct material only

Problem 2
Please refer to your book and turn to Chapter 7, pg. 366:
a. Answer all the requirements in Cornerstone 7.9; and
b. Answer all the requirements in Cornerstone 7.10.

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 ACC 122: Cost Accounting and Control
Student Activity Sheet Module # 22

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

C. LESSON WRAP-UP

1) Activity 7: Thinking about Learning (4 mins)

1. Work Tracker
You are done with this session! Let’s track your progress. Shade the session number
you just completed.

2. Think about your Learning:

From a rating of 1-10, determine if you have learned all the learning objectives. What is
the reason for your rating?
______________________________________________________________________
______________________________________________________________________

What part of the module gave you a hard time to comprehend?

______________________________________________________________________
______________________________________________________________________

Any other questions or concerns you want to raise?

______________________________________________________________________
______________________________________________________________________

2) Assignment (LO1 & LO2)

To better enhance your knowledge regarding the topic, answer the following. Your
teacher will provide you the key answer to check your answer.

1. Please refer to your book and turn to Chapter 7, pg. 375-76:

a. Answer requirement #2 in Problem 7.37

2. Please refer to your book and turn to Chapter 7, pg. 376-77:

a. Answer requirement #1-a and #1-c in Problem 7.39

FAQs:

1.How do joint costs differ from other common costs?

-Joint costs occur only in cases of joint production. A joint cost is a common cost, but a
common cost is not necessarily a joint cost. Many overhead costs are common to the products
manufactured in a factory but do not signify a joint production process.

2. Is joint cost allocation required in reporting?

-Yes. The primary reason for joint cost allocation is that financial reporting (GAAP) and
federal income tax require it.
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