Joint and By-Products Costing

MOHSIN HASSAN MUHAMMAD SAJID HUSSAM SAEED HASHIM RAZA

Joint Products:

Two or more outputs generated simultaneously, by a single manufacturing process using common input, and being substantially equal in value. Joint products (such as butter, cheese, and cream from milk, and fuel oil, gasoline, and kerosene from crude oil) are separately unidentifiable, and incur undifferentiated joint costs
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By-Products:

A by-product is a secondary product derived from a manufacturing process or chemical reaction. It is not the primary product or service being produced. A byproduct can be useful and marketable or it can be considered waste

Major By-product
Animal sources: feathersfrom poultry processing Vegetation: glycerol from the production of biodiesel Minerals and petro chemicals: gypsum from flue-gas desulfurization Other: sludge from wastewater treatment

Joint and By-Products Costing

Split off point: The point in the common production process at which the separate products are identifiable. There may be one or more split-off points in the same process depending upon the nature of process and the total numbers of products that emerge from the process.
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Objectives

The objectives of this monograph is to identify the principles to be followed in the recognition of products as joint product or by-products and to prescribe some generally accepted methods for apportionment of joint cost to different individual products. Determination of more accurate and reliable cost of production for each individual products on a consistent and uniform basis. To provide better transparency in the ascertaining the cost of joint and by-products.
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Purpose:

The ascertainment of the cost of joint products and by-product can be used for the following purposes : Valuation of manufactured products, Work in-process and intermediate products. Assessment of value of specific products under various measures such as anti-dumping, transfer pricing etc.,
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Purpose:

For evaluating insurance settlement claims. Determine the value and responding to regulatory authorities for Joint products or services. Measuring product performance and segment profitability Specifying and resolving contractual interests and obligations
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Joint product Costing

Method of joint product costing: Market or sales value method Quantitative unit method Average unit cost method Weighted average method

By-Products Costing
Method of costing by product: Recognition of gross revenue Recognition of net revenue Replacement cost method Market value method

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