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The term by-product is generally used to

denote a product of relatively small total
value produced simultaneously with a
product of greater total value. The product
with the greater value, commonly called the
main product, is usually produced in greater
quantities than the by-products.

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 Joint products are
produced simultaneously
by a common process or
series of processes, with
each product possessing
more than nominal value
in the form in which it is
produced.
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 The split-off point is defined as the point at
which these several products emerge as
separable, individual units.

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 (1)Nature of By-Products and Joint Products

By-products can be classified into two

groups according to their marketable
condition at the split-off point: (1) those
sold in their original form without need of
further processing and (2) those that
require further processing to be salable
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 In fact, these manufacturers have a dual
problem of joint cost allocation: (1)
materials cost is applicable to all grades
and (2) subsequent manufacturing costs
are incurred simultaneously for all the
different grades.

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 (2)Joint Costs

A joint cost can be defined as the cost

that arises from the simultaneous
manufacturing of products produced
from the same process.

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 These separable product costs are
identifiable with the individual product
and, generally, need no allocation.

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 By-products and joint products are difficult
to cost because a true joint cost is
indivisible.

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 The accepted methods for costing by-
products fall into two categories. In the first
category, a joint production cost is not
allocated to the by-product. In this category,
two different methods are used.

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 Any revenue resulting from sales of the
by-product is credited either to income
or to the cost of the main product; this
method is distinguished by its
treatment of the gross revenue from
the by-product and will be denoted as
method 1.

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 Alternatively, the by-product’s costs
subsequent to split-off are offset
against the by-product revenue; this
variation is distinguished by its
treatment of the net revenue from the
by-product and will be denoted as
method 2.

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 In method 1, the gross
revenue from sales of the
by-product is presented
on the income statement
as any one of the
following:

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 a. Other income
b. Additional sales revenue
c. A deduction from the cost of
goods sold of the main
product
d. A deduction from the total
production cost of the main
product

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 In the second category of costing by-
products, some portion of the joint cost is
allocated to the by-product; arguably this
allocation of joint cost is roughly
equivalent to viewing the by-product as a
joint product. Inventory costs are based
on this allocated joint cost plus any cost
of processing the by-product after split-
off.
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 In this category, two methods
are used. Method 3 is the
replacement cost method.
Method 4 is the market value
method, which is also known
as the reversal cost method.

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 Method 1: Recognition of Gross Revenue

With the gross revenue method, the final

inventory cost of the main product is
overstated to the extent that some of the cost
belongs to the by-product.

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  Method 1a: By-Product Revenue as Other
Income.
 Method 1b: By-Product Revenue as

Additional Sales Revenue.

 Method 1c: By-Product Revenue as a

Deduction from the Cost of Goods Sold.

 Method 1d: By-Product Revenue Deducted

from Production Cost.

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 Metode 1a: Pendapatan Produk Sampingan sebagai Pendapatan Lain-
lain. Metode ini diilustrasikan dalam laporan laba rugi berikut, dengan
asumsi bahwa pendapatan kotor dari penjualan produk sampingan adalah
sebesar $4.500:

Sales (produk utama, 10.000 unit $6) $ 60.000

Cost of goods sold
Beginning Inventory (1.000 unit @ $4.5) $ 4,500
Total production cost (11.000 unit @ $4.5) 49.500 +
Available for sales $54,000
Ending Inventory (2.000 unit @ $4.5) 9.000 - 45.000
-
Gross profit $ 15.000
Commercial expenses 6.000
-
Operation income $ 9.000
Miscellaneous income 4.500
+
Earning before taxes $ 13.500

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 Metode 1b: Pendapatan Produk sampingan sebagai Tambahan
Pendapatan Penjualan. Untuk metode ini, laporan laba rugi di atas akan
menampilkan $4.500 dari pendapatan penjualan produk sampingan sebagai
tambahan penjualan atas produk utama. Akibatnya, total pendapatan
penjualan berubah menjadi sebesar $64.500. Selain itu, laba kotor serta laba
operasi akan meningkat sesuai pertambahan pendapatan tersebut. Semua
angka yang lain tidak berubah, selain bahwa tidak ada item pendapatan
produk sampingan yang dicantumkan setelah laba operasi.

Sales (produk utama, 10.000 unit $6) $ 60.000

Miscellaneous income 4.500 +
Total sales 64.500
Cost of goods sold
Beginning Inventory (1.000 unit @ $4.5) $ 4,500
Total production cost (11.000 unit @ $4.5) 49.500 +
Available for sales $54,000
Ending Inventory (2.000 unit @ $4.5) 9.000 - 45.000 -
Gross profit $ 19.500
Commercial expenses 6.000 -
Operation income $ 13.500

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 Metode 1c: Pendapatan Produk Sampingan sebagai Pengurang Harga
Pokok Penjualan. Dalam metode ini, $4.500 dari pendapatan penjualan
produk sampingan dikurangkan dari $45.000 harga pokok penjualan produk
utama, sehingga laba kotor dan laba operasi akan meningkat sebesar $4.500
dibandingkan dengan yang ditampilkan dalam laporan laba rugi di atas. Laba
sebelum pajak besarnya tetap $13.500.
Sales (produk utama, 10.000 unit $6 $ 60.000
Cost of goods sold
Beginning Inventory (1.000 unit @ $4.5) $ 4,500
Total production cost (11.000 unit @ $4.5) 49.500 +
Available for sales $54,000
Ending Inventory (2.000 unit @ $4.5) (9.000)
Miscellaneous income (4.500) + 40.500 -
Gross profit $ 19.500
Commercial expenses 6.000
-
Operation income $ 13.500

©Cengage Learning Asia Pte Ltd 2008

 Sales (produk utama, 10.000 unit
@$6) $ 60.000
Cost of goods sold
Beginning inventory (1.000 @4,5) $ 4,050
Total production cost (11.000 unit
@4,5) $ 49,500
Miscellaneous income 4.500 -
Net production cost 45.000 +
Goods available for sale (12.000 unit
@$4,0875 biaya rata-rata) $ 49,050
Ending inventory (2.000 unit -
@$4,0875 8.175 - 40.875
Gross profit $ 19.125
Commercial expenses 6.000 -
Operating profit $ 13,125

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 Metode harga pasar (pembatalan biaya) dalam menghitung biaya produk
utama dan produk sampingan dapat diilustrasikan sebagai berikut:
Produk Produk
Utama Sampingan
Direct material $150.000
Direct labor 210.000

Factory overhead 120.000

Production cost (120.000 unit) $480,000
Market value (15.000 unit @$5.4) $ 27.000
Estimasi gross profit terdiri atas :
Asumsi operating income (20% dari harga jual) $ 5,400
Commercial expenses (5% dari harga jual) 1.350 6.750
$ 20,250
Estimasi production cost setelah titik pisah batas
Direct material $ 3.000
Direct labor 3.600
Factory overhead 900 7.500
Estimasi nilai produk sampingan di titik pisah batas
yang akan dikreditkan ke produk utama 12.750 $ 12,750
Biaya bersih dari produk utama $ 467,250
Ditambah biaya produksi aktual setelah titik pisah-
batas $ 6,900
Total $ 19,650
Total jumlah unit 40.000 5.000
Biaya per unit $ 11,682 $ 3,93

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 Method 2: Recognition of Net Revenue

The net revenue method recognizes the

need for assigning traceable costs to the
by-product. It does not attempt, however,
to allocate any joint production cost to
the by-product.

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 The costs incurred after the split-off point
to process or market the by-product are
recorded in accounts separate from those
for the main products. By-product figures
are shown on the income statement using
one of the four presentations described
under method 1.

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 Method 3: Replacement Cost Method

The replacement cost method ordinarily is

used by companies whose by-products are
used somewhere within the same company.

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 Method 4: Market Value (Reversal Cost)
Method

The market value method, or reversal

cost method, is basically similar to the
technique illustrated in method 1(d)

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 Metode harga pasar (pembatalan biaya) dalam menghitung biaya produk
utama dan produk sampingan dapat diilustrasikan sebagai berikut:
Produk Produk
Utama Sampingan
Direct material $150.000
Direct labor 210.000

Factory overhead 120.000

Production cost (120.000 unit) $480,000
Market value (15.000 unit @$5.4) $ 27.000
Estimasi gross profit terdiri atas :
Asumsi operating income (20% dari harga jual) $ 5,400
Commercial expenses (5% dari harga jual) 1.350 6.750
$ 20,250
Estimasi production cost setelah titik pisah batas
Direct material $ 3.000
Direct labor 3.600
Factory overhead 900 7.500
Estimasi nilai produk sampingan di titik pisah batas
yang akan dikreditkan ke produk utama 12.750 $ 12,750
Biaya bersih dari produk utama $ 467,250
Ditambah biaya produksi aktual setelah titik pisah-
batas $ 6,900
Total $ 19,650
Total jumlah unit 40.000 5.000
Biaya per unit $ 11,682 $ 3,93

©Cengage Learning Asia Pte Ltd 2008

 Joint production cost
(incurred before split-off),
can be allocated to joint
products under one of the
following methods.

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 1. The market value method, based on the
relative market values of the individual
products.
2. The average unit cost method.

3. The weighted-average method, based on

predetermined weighting factors.

4. The quantitative unit method, based on

some physical measurement unit such as

weight, linear measure, or volume.
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 (1)Market Value Method
Proponents of the market value method often
argue that the market value of any product is
to some extent a manifestation of the cost
incurred in its production.

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 Joint Products Salable at Split-Off.

The market value method allocates joint

cost on the basis of relative market values
of the joint products. This method uses the
total market value of each product, i.e., the
quantity produced multiplied by the unit
sales price.

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 Harga Pasar Pembagian
Unit per Unit pada Total Harga Biaya
Produk
Produksi Titik Pisah- Pasar Produksi
Batas Gabungan
K 20.000 $ 0,75 $ 15.000 $ 11,250
L 15.000 9,00 135.000 101.250
M 10.000 10,50 105.000 78.750
N 15.000 15,00 225.000 168.750

Total $ 480.000 $360,000

Keterangan:
Pembebanan biaya gabungan
5.000
K   360.000  11 .250
480.000
135.000
L  360.000  101.250
480.000
105.000
M   360.000  78.750
480.000
225.000
N   360.000  168.750
480.000

©Cengage Learning Asia Pte Ltd 2008

 Joint Products Not Salable at Split-Off.

Products not salable at the split-off point,

and therefore without any market value,
require additional processing before sale.
In such cases, the basis for allocation of
joint cost is a hypothetical market value at
the split-off point.
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 Biaya Pemrosesan Lebih
Produk Harga Pasar Per Unit Lanjut
(setelah Titik Pisah Batas)
K $ 1,50 $ 6.000
L 15,00 30.000
M 13,50 30.000
N 24,00 84.000

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 Biaya Pembagian
Harga Pemrosesan Harga Total
Unit Harga Biaya
Produk Pasar Setelah titik Pasar Biaya
Produksi Pasar Final Produksi
Per Unit Hipotesis* Produksi
Pisah Batas Gabungan **

K $1,5 20.000 $ 30.000 $ 6.000 $ 24.000 $ 14,400 $ 20,400

L 15,00 15.000 225.000 30.000 195.000 117.000 147.000
M 13,50 10.000 135.000 30.000 105.000 63.000 93.000
N 24,00 15.000 360.000 84.000 276.000 165.600 249.600
Total $ 750.000 $ 150.000 600.000 $ 360.000 $ 510.000

* Harga pasar hipotesis adalah harga pasar final dikurangi biaya pemrosesan
setelah titik pisah batas.

** Pembagian biaya gabungan

24.000
K   360.000  14.400
600.000
195.000
L  360.000  117 .000
600.000
105.000
M   360.000  63.000
600.000
276.000
N   360.000  165.600
600.000

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 5. Methods of Allocating Joint
Production Cost to Joint product.

 (2)Average Unit Cost Method

The average unit cost method attempts to allocate
joint cost among joint products so that each
product is allocated the same per-unit amount of
joint cost, called the average unit cost. The average
unit cost is obtained by dividing the total number
of units produced into the total joint cost.

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 untuk harga pasar, metode biaya rata-rata per unit dapat diilustrasikan
sebagi berikut:

Pembagian Biaya
Produk Unit Produksi Produksi Gabungan

K 20.000 $ 120.000
L 15.000 90.000
M 10.000 60.000
N 15.000 90.000
60.000 $360.000

Pembagian biaya gabungan:

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 (3)Weighted-Average Method

In some cases, the average unit cost

method does not give a satisfactory
answer to the joint cost allocation problem
because individual units of the various
joint products differ markedly.

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 Menggunakan data dari contoh sebelumnya, alokasi biaya gabungan
diilustrasikan sebagi berikut:

Pembagian
Rata-rata Biaya Produksi
Produk Unit Produksix Poin = Tertimbang Gabungan
K 20.000 3 60.000 $ 36.000
L 15.000 12 180.000 $ 108.000
M 10.000 13,5 135.000 $ 81000
N 15.000 15 225.000 $ 135.000
600.000 $ 360.000

Pembagian biaya produksi gabungan:

60.000
K   360.000  36.000
600.000
180.000
L  360.000  108.000
600.000
135.000
M   360.000  81.000
600.000
225.000
N   360.000  135.000
600.000

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 (4)Quantitative Unit Method

The quantitative unit method allocates joint

cost on the basis of some common unit of
measurement, such as pounds, gallons,
tons, or board feet. If the joint products are
not normally measured in the same
measurement unit, then their measures are
converted to a common unit.
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 For profit planning, management should
consider a joint product’s contribution
margin after separable costs—those
incurred after split-off—are deducted from
sales. This contribution margin allows
management to predict the amount that a
segment or product line will add to or
subtract from company profits.

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©Cengage Learning Asia Pte Ltd 2008