管理会计英文讲义 管理会计Session 9 Joint products and by-products.pdf

Session 9 Joint products and by-products Main contents: 1. Multi-product processes 2. Joint products 3. By-products 9.1 Multi- product processes The nature of process costing is that the process often produces more than one product. These products may be described as either joint products or by-products. ● Joint product: two or more products separated in the course of processing, each having a sufficiently high saleable value to merit recognition as a main product. A joint product is regarded as an important saleable item, and so it should be separately costed. The profitability of each joint product should be assessed in the cost accounts. ● By products: is an incident product from a process which has an insignificant value compared to the main product. A by-product is not important as a saleable item, and whatever revenue it earns is a “bonus” for the organization. Because of their relative insignificance, by-products are not separately cost. ● Common costs or joint costs: The point at which joint products and by-products become separately identifiable is known as the split-off point or separation point. Costs incurred prior to this point of separation are common or joint costs. 9.2 Accounting for joint products Problems for joint products: ● How common costs should be apportioned between products, in order to put a value to closing inventories and to the cost of sale （ and profit） for each product. ● Whether it is more profitable to sell a joint product at one state of processing, or to process the product further and sell it at a later stage. Reason for apportionment joint/common cost: ● To put a value to closing inventories of each joint product ● To recor