Submitted by: Submitted by zhangruixue
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Words: 678
Pages: 3
Category: Business and Industry
Date Submitted: 09/08/2014 11:29 PM
Joint Products
Introduction
A joint product is defined as:
|Two or more products separated in the course of processing, each having a sufficiently high saleable value to meet recognition as|
|a main product. |
Costing of Joint Products
• Since joint products are produced simultaneously from the same process, it becomes difficult to determine with certainty what proportion of the joint costs have been incurred by each product up to the point of separation.
• Joint costs are total costs incurred up to the point of separation.
• It becomes necessary, therefore, to find an equitable method, which must be consistently used, of apportioning these costs up to the point of separation.
• The reasons for apportioning costs include:
a) to determine the unit cost of each product;
b) to value work in progress and finished goods; and
c) to determine the cost of sales and selling price
Methods of Apportionment
1. Apportionment based on sales value
• The costs incurred up to the point of separation are apportioned to different products on the basis of their sales or market values.
• A drawback of this method is that product with a higher selling price will be charged with more cost even though here was no increase in the joint costs. In other words, more costs are apportioned to more valuable products.
Quick Example 1
2 joint products, X and Y are produced. The following are available:
Materials 2,000 units at RM5 per unit
Labour RM6,000
Overhead RM4,000
Quantity produced: X 800 units
Y 1,200 units
Selling price: X RM5 per unit; Y RM10 per unit
Additional processing cost: X RM1,600
Y RM2,400
You are required to apportion joint cost.
Solution:
Joint products Quantity (units) Selling price Value
X 800 RM5 RM 4,000
Y 1,200...