Transforming the brick and mortar tutorial rooms did you have any interest or dividend income into a complete new-age digital classroom is what we aim at. We support our students by providing course videos, practice materials and also arrange mock tests for them. Joint products are two or more products that are produced simultaneously from a common input or process, each having a significant relative sale value. This process only takes the total joint cost and divide the total quantity of all products type. This method will compare all product selling prices as a percentage of total sales.

From the material use, worker wage, how the machine performs, and the level of work difficulties, then we will decide the cost of each product base on our professional judgment. However, it will be hard for some products in which the output cannot be measured easily. Some process uses the same raw material but produces the output of a liquid and solid item. In other words, the joint cost is an input and the joint product is an output obtained from the process. As the quality/quantity of the input does affect the quality/quantity of the output same is true in the case of joint cost and joint product. Joint production activities are those that involve processing different products together with costly processes, rather than using independent methods to process each product.

In joint products, when raw material is processed, it results in more than two products. The production of joint products is performed consciously, by the management of the respective organization, i.e. the management aims at producing all the products. Any outputs having insignificant economic value and which are not primarily intended to be manufactured are called by-products. This differentiation is needed because of difference in accounting between by-products and joint products.

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Example of joint cost allocation based on the sales value

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. The cost can be allocated for the joint products after the split-off point has been achieved. The allocated cost can be used for accounting purposes, including as a cost to be added for the further process cost or as a complete cost if the business does not further processes the products. The chief characteristic of the joint product costing is that the cost of these different products results in an indivisible sum for all products, rather than in individual amounts for each product.

Usually, all the costs incurred on a joint production process are allocated to the joint products whereas no costs are typically allocated to any by-products. Joint products are two or more outputs other than by-products, that are generated from a single production process that uses common inputs. In cost accounting, all of the outputs of a single process are not joint products, only those that have significant economic value are considered joint products.

Just-In-Time: History, Objective, Productions, and Purchasing

Joint products are the products which are produced simultaneously, with the same raw material and process, and requires further processing to become a finished product after they get separated. The joint cost is incurred upto the split-off point (the point at which various products are separated). Any cost incurred on a particular product after the split-off point is not included in joint cost but is regarded as further processing cost of that individual product.

1. The main products are produced in larger quantities whereas by-products are produced in relatively small quantities.
2. For example, the costs related to power and fuel may be allocated among products on the basis of metered usage or production volume of each individual product.
3. For example, milk is processed into butter, cream, and cheese, all of which are joint products.
4. They come into existence because their production cannot be avoided because of the nature of production process or the raw materials being used in the production process.

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The key distinction between joint products and by-products lies in their relative sales value. Joint products have significant sales values, while by-products have comparatively lower sales values. This distinction is crucial for allocating joint costs to the respective products. In cost accounting, joint products and by-products are two types of products that are produced from the same manufacturing process.

AccountingTools

Someone on our team will connect you with a financial professional in our network holding the correct designation and expertise. Our team of reviewers are established professionals with decades of experience in areas of personal finance and hold many advanced degrees and certifications. An increase in one product’s output will increase the quantity of the other products, or vice versa, but not necessarily in the same proportion. It will calculate the product’s costing base on the Standard Costing system. We need to have a preset standard cost for each product type, and then the cost will absorb based on that rate. Ask a question about your financial situation providing as much detail as possible.

Examples

The total production cost of multiple products involves both the joint cost and individual product costs. Mostly, a quantitative relationship exists among the production of joint products; that is, if the production of one product is increased, the production of other joint products will also increase and vice versa. However, the proportion in which the output of one product impacts the output of other products may not be the same throughout the production process. Here, lumber and firewood are joint products whereas sawdust is a by-product due to its insignificant value.

In economics, joint product is a product that results jointly with other products from processing a common input; this common process is also called joint production.[1] A joint product can be the output of a process with fixed or variable proportions. There is a separation point called as a split-off point, from where the products are separated and identified. At this stage, either the products are sold directly or go for further processing, to turn out as finished product. The choice of joint cost allocation method depends on the specific circumstances of the production process.

A joint cost is the result of producing two or more different products from a single cost factor. It may be defined as the cost incurred to produce two or more different products by processing one or more raw materials through a common production process or a series of production processes. In summary, joint products and by-products are two important concepts in cost accounting. Joint products have significant types of equity accounts sales values and require joint cost allocation, while by-products have lower sales values and are typically valued at their net realizable value. Understanding these concepts is essential for accurately determining the cost of products and making informed management decisions. Joint products are multiple products that result from a single process and the same materials.

First, we need to separate the variable cost from the total cost; the remaining will be the fixed cost. The variable cost will be allocated base on the actual or physical method. By Product can be understood as the subsidiary or secondary product which is incidentally produced, along with the main product, and has saleable or usable value. While producing the main product, there are instances when another product emanates which are of minor importance, as compared to the main product, are the by-product. Both products have to be processed after the split-off point with the cost of USD 5,000 for each product.

In case of common cost, the products or services can be obtained separately and any shared or common cost incurred to obtain the products and services can be allocated among them on the basis of relative usage of shared facilities. For example, the costs related to power and fuel may be allocated among products on the basis of metered usage or production volume of each individual product. Consequential costs are the indirect overhead costs that arise from a joint production activity in which a variety of products result from one process. For example, in the case of assembly line manufacturing, many machines and work stations are used to complete multiple products produced on a single assembly line. Joint products are the products that are produced as a result of a single production process. These products are produced as a result of the joint cost incurred by the company.