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Joint and By-Products

The document discusses joint production and accounting for joint products and by-products. It provides examples and problems about determining production units, sales value, joint costs, and allocating joint costs between joint products using different methods like the net realizable value method.

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84 views12 pages

Joint and By-Products

The document discusses joint production and accounting for joint products and by-products. It provides examples and problems about determining production units, sales value, joint costs, and allocating joint costs between joint products using different methods like the net realizable value method.

Uploaded by

dbpcastro8
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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JOINT AND BY-

PRODUCTS
Ms. Ellery de Leon
Joint production NRV Method
Split Off Point Products
A
B
Joint Production
C
Joint Cost
Final Point

• is a production process that yields two or more products


simultaneously from the same raw materials.
• can yield Joint products and by-products.
• Incurs JOINT COST; consisting of direct materials, direct labor
and factory overhead which is NOT specifically identifiable
with any of the products being simultaneously produced
Joint products and by-products

JOINT PRODUCTS BY PRODUCTS

❑ The products must be the ❑ The product is not the primary


primary objective of the objective of the manufacturing
manufacturing operations. operations.

❑ Sales value must be relatively ❑ Sales value of the by-product is


high if compared with the comparatively low as compared
products resulting at the same with the sales value of the main
time period. product.
ACCOUNTING METHODS FOR
MAIN PRODUCTS

❑Physical output method/ Average unit cost method

❑Market value at split-off method

❑NRV method (approximated market value at split-off)


PROBLEM # 1
1.
PROD U.P. MV/ Unit Total MV JT Cost
A 500 40 20,000 8,000
B 300 60 18,000 7,200
C 200 35 7,000 2,800
1,000 45,000 18,000
18,000/ 45,000 = 40%
2.
PROD U.P. JT Cost
A 500 9,000
B 300 5,400
C 200 3,600
1,000 18,000
18,000/ 1,000 = 18
PROBLEM # 1
3. Points Total
PROD U.P. Assigned Points JT Cost
A 500 5 2,500 7,500
B 300 9 2,700 8,100
C 200 4 800 2,400
1,000 6,000 18,000
18,000/ 6,000 = 3
4. Weight per Total
PROD U.P. Unit Weight JT Cost
A 500 4 2,000 6,000
B 300 10 3,000 9,000
C 200 5 1,000 3,000
1,000 6,000 18,000
18,000/ 6,000 = 3
PROBLEM # 2
1.
PROD U.P. JT Cost APC Total Cost
A 13,200 66,000 19,800 85,800
B 8,800 44,000 15,000 59,000
C 4,400 22,000 11,000 33,000
26,400 132,000 45,800 177,800
132,000/ 26,400= 5

2. Total
PROD Total SV JT Cost APC Cost
A 88,000 52,800 19,800 72,600
B 77,000 46,200 15,000 61,200
C 55,000 33,000 11,000 44,000
220,000 132,000 45,800 177,800
132,000/ 220,000= 0.60
Sales- (JC + APC)= GP
PROBLEM # 3 Sales- JC – APC = GP
Sales – APC – JC = GP
(Sales – APC) – JC = GP
NRV- JC = GP

PROD SALES APC NRV % JT Cost GP


A 115,000 30,000 85,000 80% 68,000 17,000
B 10,000 6,000 4,000 80% 3,200 800
C 4,000 4,000 80% 3,200 800
D 30,000 1,000 29,000 80% 23,200 5,800
159,000 37,000 122,000 97,600 24,400

97,600/ 122,000= 80%


PROD U.P. USP TSP JT Cost GP
A 500,000 0.15 75,000 65,946 9,054
B 10,000 0.50 5,000 4,396 604
C 5,000 0.80 4,000 3,517 483
D 9,000 3.00 27,000 23,741 3,259
524,000 111,000 97,600 13,400
PROBLEM # 4

Total Unit
PROD U.P. USP TSP APC NRV JT Cost Cost Cost
M 1,500 10 15,000 3,000 12,000 8,400 11,400 7.60
N 2,500 12 30,000 2,000 28,000 19,600 21,600 8.64
O 1,000 15 15,000 5,000 10,000 7,000 12,000 12.00
5,000 60,000 10,000 50,000 35,000 45,000

Actual Cost of Inventory


PROD Sales Sales Gross Profit Value
M 12,000 9,120 2,880 (300*7.60) 2,280
N 24,000 17,280 6,720 (500*8.64) 4,320
O 12,000 9,600 2,400 (200*12) 2,400
48,000 36,000 12,000 9,000

35,000/50,000= .70
ACCOUNTING FOR BY-PRODUCT

CATEGORY 1: In which by-products are recognized when sold.

The net revenue may be presented on the income statement as:


❑ Other income
❑ Additional sales revenue
❑ A deduction from the cost of goods sold of the main product
ACCOUNTING FOR
BY-PRODUCT
CATEGORY2: In which by-products are recognized when produced.
Shown on the I/S as a deduction from the total production cost

1. Net realizable value method – under this method, the expected sales value of the
by-product produced is reduced by the expected additional processing costs and
marketing and administrative expenses.

2. Reversal cost method – under this method, the expected value of the by-product
produced is reduced by the expected additional processing costs, selling and
administrative expenses and normal gross profit of the by-product.
PROBLEM # 5
Total Joint Production Cost P 204,000
Less:NRV of by-Products:
Est. SP(6*2,000) 12,000
Less:
APC (2*2,000) 4,000
EXP (1*2,000) 2,000
NPM (1*2,000) 2,000 8,000 4,000
net joint cost allocated to main
products P 200,000

Allocated using the NRV-M NRV


X 8,000 * (20-5) 120,000 80,000
Y 10,000 *(25-7) 180,000 120,000
TOTAL NRV 300,000 200,000

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