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    Joint Cost REV

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    kikikikiyowooo
    The document discusses approaches to allocating joint costs between joint products. Joint costs are the costs of a single production process that yields multiple products simultaneously. There are two main approaches: 1) using physical measures like units produced or weight, and 2) using estimated sales value at the split-off point. The examples show allocating $500,000 of joint costs between beef cut and beef ribs using their production quantities and estimated sales values. Physical measures allocate 75%/$375,000 to beef cut and 25%/$125,000 to beef ribs. Sales value at split-off allocates 86%/$428,571 to beef cut and 14%/$71,429 to beef ribs.

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    Joint Cost REV

    Uploaded by

    kikikikiyowooo
    20 views19 pages
    The document discusses approaches to allocating joint costs between joint products. Joint costs are the costs of a single production process that yields multiple products simultaneously. There are two main approaches: 1) using physical measures like units produced or weight, and 2) using estimated sales value at the split-off point. The examples show allocating $500,000 of joint costs between beef cut and beef ribs using their production quantities and estimated sales values. Physical measures allocate 75%/$375,000 to beef cut and 25%/$125,000 to beef ribs. Sales value at split-off allocates 86%/$428,571 to beef cut and 14%/$71,429 to beef ribs.

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    The document discusses approaches to allocating joint costs between joint products. Joint costs are the costs of a single production process that yields multiple products simultaneously. There are two main approaches: 1) using physical measures like units produced or weight, and 2) using estimated sales value at the split-off point. The examples show allocating $500,000 of joint costs between beef cut and beef ribs using their production quantities and estimated sales values. Physical measures allocate 75%/$375,000 to beef cut and 25%/$125,000 to beef ribs. Sales value at split-off allocates 86%/$428,571 to beef cut and 14%/$71,429 to beef ribs.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    20 views19 pages

    Joint Cost REV

    Uploaded by

    kikikikiyowooo
    The document discusses approaches to allocating joint costs between joint products. Joint costs are the costs of a single production process that yields multiple products simultaneously. There are two main approaches: 1) using physical measures like units produced or weight, and 2) using estimated sales value at the split-off point. The examples show allocating $500,000 of joint costs between beef cut and beef ribs using their production quantities and estimated sales values. Physical measures allocate 75%/$375,000 to beef cut and 25%/$125,000 to beef ribs. Sales value at split-off allocates 86%/$428,571 to beef cut and 14%/$71,429 to beef ribs.

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    Cost Allocation:

    Joint Products & Byproducts


    Prepared by:
    Dahlia Sari | Evony Silvino | Adela Pravita | Celine Cecilia
    the costs of a single production process that
    yields multiple products simultaneously

    Split-off point
    Joint cost Separable cost

    the costs of a single production process that all costs (manufacturing, marketing, distribution, etc.) incurred beyond
    yields multiple products simultaneously the splitoff point that are assignable to one or more individual products.

    Further
    processing

    Beef Cut Corned Beef

    Joint Input Joint Production Further


    Process processing

    Beef Ribs Frozen Beef Ribs


    Split-off point
    Joint cost Separable cost

    Joint Products products that have relatively high


    sales value at the splitoff point

    Further
    processing

    Beef Cut Corned Beef

    Joint Input Joint Production Further


    Process processing

    Beef Ribs Frozen Beef Ribs


    Illustrations
    Split-off point
    Joint cost Separable cost

    Further
    processing
    Beef Cut Corned Beef
    Joint costs: Price = $100/kg Price = $200/units
    Beg. inv = 0 Separable
    $500,000 Production = 7,500 kg
    Beg. inv = 0
    Production = 10,000 units
    Trf. out = 7,500 kg costs: Sales = 8,000 units
    Sales = 5,000 kg $500,000 End. inv = 2,000 units
    End. inv = 2,500 kg

    Further
    processing

    Beef Ribs Frozen Beef Ribs


    Joint Input Joint Production
    Process Price = $50/kg Price = $150/units
    Beg. inv = 0 Separable Beg. inv = 0
    Production = 2,500 kg Production = 2,000 units
    Trf. out = 2,500 kg costs:
    Sales = 1,750 units
    Sales = 2,000 kg $100,000 End. inv = 250 units
    End. inv = 500 kg
    For inventory costing for
    Reimbursement under contracts
    financial accounting purposes

    Why
    Allocate
    Joint
    Cost?
    For inventory costing for internal
    Rate regulation
    accounting purposes
    Approaches to Allocate Joint Cost

    Approach 1: Approach 2:
    Physical measure Market based

    Estimated Constant
    Sales value at
    Physical-units method Net-realizable-value Gross-margin
    split-off method
    method percentage
    “Allocation based on the
    Allocation based on a Allocation based on the
    “Allocation based on final overall gross-margin
    physical measure of the relative values of the
    sales values less separable percentage that is identical
    joint products at the split-off products at the split-off
    processing costs.” for each of the individual
    point. point.
    products.”
    Approach 1: Physical Measures
    Split-off point
    Joint cost Separable cost

    Further
    processing
    Beef Cut Corned Beef
    Joint costs: 75% Production: Price = $200/units
    $500,000 7,500 kg Separable Beg. inv = 0
    Production = 10,000 units
    costs: Sales = 8,000 units
    Joint costs allocated:
    $375,000 $500,000 End. inv = 2,000 units

    Further
    25% processing

    Beef Ribs Frozen Beef Ribs


    Joint Input Joint Production
    Process Production: Price = $150/units
    2,500 kg Separable Beg. inv = 0
    costs: Production = 2,000 units
    Joint costs allocated: Sales = 1,750 units
    $250,000 End. inv = 250 units
    $125,000
    Approach 1: Physical Measures
    Approach 1I: Sales Value at Splitoff
    Split-off point
    Joint cost Separable cost

    Further
    processing
    Beef Cut Corned Beef
    Joint costs: 86% Sales Value: Price = $200/units
    $500,000 7,500 kg x $100 Separable Beg. inv = 0
    = $750,000 costs: Production = 10,000 units
    Sales = 8,000 units
    Joint costs allocated: $500,000 End. inv = 2,000 units
    $428.571

    Further
    14% processing

    Beef Ribs Frozen Beef Ribs


    Joint Input Joint Production
    Process Sales Value:
    Price = $150/units
    2,500 kg x $50 Separable Beg. inv = 0
    = $125.000 Production = 2,000 units
    costs:
    Sales = 1,750 units
    Joint costs allocated: $250,000 End. inv = 250 units
    $71.429
    Approach 1I: Sales Value at Splitoff
    Approach 1I: Net-realizable-value Method
    Split-off point
    Joint cost Separable cost

    Further
    processing
    Beef Cut Corned Beef
    Joint costs: 88% NRV: Sales Value:
    $500,000 $2,000,000 - $500,000 Separable 10,000 units x $200
    = $1.500.000 costs: =$2,000,000
    Joint costs allocated: $500,000
    $441.176

    Further
    12% processing

    Beef Ribs Frozen Beef Ribs


    Joint Input Joint Production
    Process NRV:
    Sales Value:
    $300,000 - $100,000 Separable 2,000 units x $150
    = $200,000 costs: =$300,000
    Joint costs allocated: $100,000
    $58.824
    Approach 1I: Net-realizable-value Method
    Approach 1I: Constant Gross-Margin Method
    Split-off point
    Joint cost Separable cost

    Further
    processing
    Beef Cut Corned Beef
    Joint costs: Production costs:
    $500,000 Joint costs allocated: Separable $2,000,000 -
    $956.522 - $500,000 costs: 52,17% x $2,000,000
    = $456.522 $500,000 = $956.522

    Further
    processing

    Beef Ribs Frozen Beef Ribs


    Joint Input Joint Production
    Process
    Joint costs allocated: Separable Production costs:
    $143.478 - $100,000 $300.000 -
    costs: 52,17% x $300.000
    = $43.478 $100,000 = $143.478
    Approach 1I: Constant Gross-Margin Method
    Approach 1I: Constant Gross-Margin Method
    Accounting for Byproducts
    Split-off point
    Joint cost Price = $10/kg
    Beg. inv = 0
    Production = 51,250 kg
    Sales = 42,250 kg
    End. inv = 9,000 kg
    Chicken Meat

    Byproducts
    Joint Input Joint Production
    Price = $2/kg
    (Chicken) Process
    Beg. inv = 0
    Production = 5,250 kg
    Sales = 1,700 kg
    Direct materials = $225,000
    End. inv = 3,550 kg
    Conversion costs = $125,000
    Chicken Skin

    relatively low value or quantity when


    compared to major products
    Production Sales
    Method Method
    Revenue
    Main product: Chicken Meat (42,250 kg x $10 per kg) $422,500 $422,500
    Byproduct: Chicken Skin (1,700 kg x $2 per kg) ----- 3,400
    Total revenues 422,500 425,900
    Cost of goods solds:
    Total manufacturing costs ($225,000 + $125,000) 350,000 350,000
    Deduct byproduct revenue and inventory (5,250 kg x $2 per kg) (10,500) -----
    Net manufacturing costs 339,500 350,000
    Deduct main-product inventory (59,620)¹ (61,463)²
    Cost of goods sold 279,880 288,537
    Gross margin $142,620 $137,363
    Gross-margin percentage ($142,620 ÷ $422,500; $137,363 ÷ $425,900) 33.76% 32.25%
    Inventoriable costs (end of period):
    Main product: Chicken Meat $59,620 $61,463
    Byproduct: Chicken Skin (3,550 kg. x $2 per kg)³ 7,100 0
    ¹(9,000 ÷ 51,250) x net manufacturing cost = (9,000 ÷ 51,250) x $339,500 = $59,620
    ²(9,000 ÷ 51,250) x total manufacturing cost = (9,000 ÷ 51,250) x $350,000 = $61,463
    ³Recorded at selling prices.
    Journal Entries
    Production method Sales method
    Direct materials
    Dr. Work in Process 225,000
    purchased and used in
    Cr. Accounts Payable 225,000
    production
    Conversion costs used
    Dr. Work in Process 125,000
    in the production
    Cr. Various accounts 125,000
    process
    Dr. Byproduct Inventory—Chicken Skin 10,5001
    Dr. Finished Goods—Chicken Meat 350,000 Cost of goods
    Dr. Finished Goods—Chicken Meat 339,5002
    Cr. Work in Process 350,000 completed
    Cr. Work in Process 350,0003
    Dr. Cash or Accounts Receivable 422,5004
    Sale of main products
    Cr. Revenues—Chicken Meat 422,500
    Dr. Cost of Goods Sold 279,8805 Dr. Cost of Goods Sold 288,5376 Cost of goods sold
    Cr. Finished Goods—Chicken Meat 279,880 Cr. Finished Goods—Chicken Meat 288,537 (main product)
    Dr. Cash or Accounts Receivable 3,4007 Dr. Cash or Accounts Receivable 3,400
    Sale of byproducts
    Cr. Byproduct Inventory—Chicken Skin 3,400 Cr. Revenue—Chicken Skin 3,400

    1
    5,250 kg x $2 per kg = $10,500
    2
    $350,000 - $10,500 = $339,500
    3
    225,000+$125,000 = $350,000
    4
    42,250 kg x $10 per kg = $422,500
    5
    (42,250 kg. ÷ 51,250 kg) x $339,500 = $279,880
    6
    (42,250 kg. ÷ 51,250 kg) x $350,000 = $288,537
    7
    1,700 kg x $2 per kg = $3,400
    THANKS!

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