Required – Apportion the joint costs using weights assigned. There is also one more difference between the two. Till the point of separation, joint products are indivisible.

$\bullet$ Amber chips can be incorporated into Arnold’s own memory stick. However, this additional processing causes a loss of 27,500 units of Amber. Kimbell also learns that $75 \%$ of the material loss that occurs in the cleaning and sizing process can be salvaged as coal fines, which can be sold to steel manufacturers for their furnaces.

Principal Objectives of Analysis of Costs and Accounting of Joint Products and By Products

Given the immateriality of by-product revenues and costs, byproduct accounting tends to be a minor issue. Allocate the $\$ 5,400,000$ joint production cost to Amber, Bronze, and $A T$ with Cobalt using joint products are outputs from common inputs and a common production process. the NRV method. Joint costs are $\$ 190,000$; there was no beginning or ending inventory. Because the Red Rock is sold at a premium, it is processed further to ensure uniformity of the rocks.

A maker of farm equipment would like to shut down its manufacturing facility and outsource production. Summarize the result of dropping the Apple LLP account using the format presented in Figure 7.12 “Summary of Differential Analysis for Colony Landscape Maintenance”. Summarize the result of dropping the computer product line using the format presented in Figure 7.7 “Summary of Differential Analysis for Barbeque Company”. Assume making windshields internally is Alternative 1, and buying windshields from an outside manufacturer is Alternative 2. A maker of high-end stereo equipment would like to shut down its manufacturing facility and outsource production. Calculate the contribution margin per unit of constrained resource for each product. Summarize the result of accepting the special order using the format presented in Figure 7.14 “Summary of Differential Analysis for Tony’s T-Shirts”.

What is a joint cost and how is it usually allocated among the products produced from them?

Joint products are outputs from common inputs and a common production process. When such products are further processed after split-off, their total costs also include further processing cost. This method is suitable when physical quantity of joint products does not reflect their value and a reliable estimate of their sale value can be easily made. Prime costs are a firm’s expenses directly related to the materials and labor used in production. … The prime cost calculates the direct costs of raw materials and labor that are involved in the production of a good. Direct costs do not include indirect expenses, such as advertising and administrative costs.

To compare methods, we report gross – margin percentages for individual products under each method. $\bullet$ Product A is processed further in the salting department at a cost of $\$ 27,000$. It yields 12,000 pounds of salted peanuts, which are sold for $\$ 12$ per pound. Give two limitations of the physical-measure method of joint-cost allocation.

What are joint products and joint costs?

Vail Door Company currently manufactures doors used in the production of custom homes. Management is interested in outsourcing production of the doors to a reputable manufacturing company that can supply the doors for $90 per unit. Vail incurs the following annual production costs to produce 3,000 doors internally. Quality Glass currently manufactures windshields for automobiles.

Calculate the amount of allocated fixed costs to be assigned to each customer, and determine the profit or loss for each customer. Should Consulting Group drop Customer Two? The cost of inputs required to produce joint products.

quiz_hapter 11-solution ( – Chapter 11 Service Department…

It can also be a cost motivator, giving managers incentives for making sure that costs are not accumulated carelessly. Managers will be more likely to operate their departments with greater efficiently. Show journal entries at the time of production and at the time of sale assuming SRC accounts for the byproduct using the production method. The accountant for SRC needs to record the information about the joint and byproducts in the general journal, but is not sure what the entries should be. The company has hired you as a consultant to help its accountant.

Prepare an analysis for Liverpool Sawmill that compares processing the decorative pieces further, as it currently does, with selling them as a rough-cut product immediately at splitoff. Could Chicago Oil have increased its November operating income by making different decisions about the further processing of products $A, B,$ or $D ? $ Show the effect on operating income of any changes you recommend. Describe two major methods to account for byproducts. Why might the number of products in a joint-cost situation differ from the number of outputs? We are a non-profit group that run this website to share documents. Cost center whose costs are charged to other departments in the organization.

Cogeneration delivers the joint products of heat and power; trigeneration provides cold, heat and power. With extraction steam turbines, cogeneration has variable proportions; with an internal combustion engine the proportions of heat and power are fixed.

• Closing stock of the by-product is valued at selling price less a reasonable expenses to be incurred for selling the stock.
• Process industry scenario with a possible costing model is discussed to exemplify the process.
• Do not assume all separable costs in joint – cost allocations are always incremental costs.
• Also provide your recommendation for MCC and a rationale for that recommendation.
• Show how you would propose to apportion the joint costs of manufacture.
• Management requires a profit of 60 percent of the selling price.
• The processing of a particular material may result in the production of two or more products.

The NRV method accounts for all separable costs, regardless of how much higher or lower they are than your plan. NRV also handles any change to the final sales value due to a change in market conditions. NPV captures any changes to costs and sale price that might occur as products are produced separately. Charlotte Company produces two joint chemical products, product A and B.

The company would have to pay excise taxes of $20 \%$ on the selling price of the beverage. Joint production processes are common in the agriculture industry, the food manufacturing industry, and the chemical industry. (40 min.) Alternative methods of joint-cost allocation, product-mix decisions. A diagram of the situation is in Solution Exhibit 16-33.

• It yields 12,000 pounds of salted peanuts, which are sold for $\$ 12$ per pound.
• The process is borne by the joint products in the ratio of their output weight.
• The costs incurred are – Variable cost Rs.67,900 and Fixed cost Rs.33,300.
• The sales value at splitoff method of joint-cost allocation is the best method for generating the information managers need for this decision.” Do you agree? Explain.
• The company typically charges 15 percent above cost and estimates the home will cost $500,000 to build.

Where the Standard Costing system is in vogue, the joint costs of the product will be apportioned on the basis of standard costs set for the respective joint products. Joint costs can be apportioned https://business-accounting.net/ to different products only by means of some suitable bases of apportionment. Total costs of production of multiple products combine both joint costs and separable individual product costs.

Methods of Joint Cost Allocation in Cost Accounting

Here, lumber and firewood are joint products whereas sawdust is a by-product due to its insignificant value. Therefore, all of the joint costs are likely to be allocated to lumber and firewood. Some of the joint products may need further work after split-off point in a separate process to bring them into usable or saleable form. In such cases, it is necessary to perform such additional work to avoid a loss and the total cost of the resulting product includes additional expenses incurred after slit-off. Which of the following best describes the objective of joint cost allocation?

Apportionment of joint cost on behaviour basis is more appropriate. To determine the pattern of production and the most profitable sales-mix. By-products are not produced deliberately by the companies but they are produced incidentally to the production of Main Product or Joint Products. ChemicalAB Quantity Sale Value$15,000$60,000 Further Processing Cost$4,000$2,000Total manufacturing cost of joint process was $30,000. All of the above products are obtained from a joint process. Product costing in SAP demands a detailed understanding of the business process and a strong integration with other modules. SAP provides elaborate process to map complex costing models.