CHAPTER16CostAllocation:JointProductsandByproducts

Chapter16learningobjectivesIdentifythesplit-offpointinajoint-costsituationanddistinguishjointproductsfrombyproductsExplainwhyjointcostsareallocatedtoindividualproductsAllocatejointcostsusingfourmethodsIdentifysituationswherethesalesvalueatsplitoffmethodispreferredwhenallocatingjointcosts16-2

Chapter16learningobjectives,concludedExplainwhyjointcostsareirrelevantinasell-or-processfurtherdecisionAccountforbyproductsusingtwomethods16-3

JointCostTerminologyJointcosts—thecostsofaproductionprocessthatyieldsmultipleproductssimultaneously.Splitoffpoint—thejunctureinajointproductionprocesswheretwoormoreproductsbecomeseparatelyidentifiable.Separablecosts—allcostsincurredbeyondthesplitoffpointthatareassignabletoeachofthespecificproductsidentifiedatthesplitoffpoint.16-4

JointCostTerminology,cont’dCategoriesofjointprocessoutputs:OutputswithapositivesalesvalueOutputswithazerosalesvalue.Product—anyoutputwithapositivesalesvalue,oranoutputthatenablesafirmtoavoidincurringcosts:Salesvaluecanbehighorlow.16-5

JointCostTerminology,concludedMainproduct—outputofajointproductionprocessthatyieldsoneproductwithahighsalesvaluecomparedtothesalesvaluesoftheotheroutputs.Jointproducts—outputsofajointproductionprocessthatyieldstwoormoreproductswithahighsalesvaluecomparedtothesalesvaluesofanyotheroutputs.Byproducts—outputsofajointproductionprocessthathavelowsalesvaluescomparedtothesalesvaluesoftheotheroutputs.16-6

ExamplesofJointCostSituations16-7

AllocatingJointCostsBeforeamanagerisabletoallocatejointcosts,heorshemustfirstlookatthecontextfordoingso.Jointcostsmustbeallocatedtoindividualproductsorservicesforseveralpurposes,including:Computationofinventoriablecostsandcostofgoodsso