What is joint product and by-product?

What is joint product and by-product?

When the production of two or more products of similar value, are made together with same input and process, is called joint product. The term by-product means a product which is incidentally produced, during the processing operation of another product. Economic value of by-product is lower than the main product.

What is meant by joint and byproduct costing with an example?

In short, we can say, when two or more products of equal importance are simultaneously produced, then they are known as joint products. Example: In oil industry kerosene, gasoline, fuel oil, lubricants etc. are all produced from the same product, crude petroleum.

What is joint product in process costing?

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. From this point onwards, the two products can be processed individually.

How is joint product treated in cost accounts?

The costs incurred in the process are shared between the joint products alone. The by-products do not pick up a share of the costs, like normal loss. The sales value of the by-product at the split-off point is treated as a reduction in costs instead of an income, again just the same as normal loss.

What is joint product and by-product in cost accounting?

A joint cost is a cost that benefits more than one product, while a by-product is a product that is a minor result of a production process and which has minor sales.

What do you mean by by-products?

When the process of making one thing results in a second product as well, that second thing is called a byproduct. Molasses, for example, is a byproduct of refining sugar. Sawdust is a byproduct of the lumber industry, and feathers are a byproduct of poultry processing.

What is joint cost and by-product cost?

A joint cost is a cost that benefits more than one product, while a by-product is a product that is a minor result of a production process and which has minor sales. The point at which the business can determine the final product is called the split-off point.

What are the objectives of joint product costing?

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.

Why is joint product costing important?

You need to calculate joint costs to calculate inventoriable costs. Those costs are attached to inventory and expensed when the product is sold. So you need joint costs to calculate inventory values and the cost of goods sold.

What do you mean by by-product in cost accounting?

A by-product is a secondary product which incidentally results from the manufacture of main product and also from the same process. A by-product is a product which arises incidentally in the production of the main products and which has a relatively small sales value compared with the main products.

What are joint products give two examples of joint products?

Few examples of joint products are:

• Processing of crude oil to obtain gasoline, diesel, asphalt, jet fuel and lubricants etc.
• Production of butter, cheese and cream from milk.
• Different grades of wood obtained from a same kind of tree.

What’s the difference between by-product costing and joint product costing?

By-product costing and joint product costing. A joint cost is a cost that benefits more than one product, while a by-product is a product that is a minor result of a production process and which has minor sales.

How are joint and byproduct costs allocated?

There are two common methods for allocating joint costs. One approach allocates costs based on the sales value of the resulting products, while the other is based on the estimated final gross margins of the resulting products. The calculation methods are as follows: Allocate based on sales value.

Do you charge joint costs or by-products?

Therefore the joint costs should be charged only to the joint products • Further processing costs should be charged to the by-product 9 fLecture Notes – 12/13 Jan 2015 Tutorial questions Discussion: a. What is the joint costing problem? b. How do joint costs differ from other common costs? c.

How to calculate joint cost of goods sold?

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. If there are any by-products, do not allocate any costs to them; instead, charge the proceeds from their sale against the cost of goods sold.