A joint cost is
a cost that benefits more than one product
, while a by-product is a product that is a minor result of a production process and which has minor sales. … Besides the split-off point, there may also be one or more by-products.
What is the example of joint cost?
Joint Costs
For example,
the cost of fertilizing and harvesting sunflowers
qualifies as a common cost. If a company uses the kernels in two or more different processes — such as roasting and crushing — the costs become joint costs. Another example of joint costing is feeding both sheep and cattle.
What are examples of joint products?
Few examples of joint products are:
Processing of crude oil to obtain gasoline, diesel, asphalt, jet fuel and lubricants
etc. Production of butter, cheese and cream from milk. Different grades of wood obtained from a same kind of tree.
What does joint product mean?
Joint products are
two or more products that are generated within a single production process
. They can’t be produced separately and will incur undifferentiated joint costs. … Joint products can’t be separated until a specific ‘split-off point’ or ‘separation point’.
What is included in joint costs?
In accounting, a joint cost is a cost incurred in a joint process. Joint costs may include
direct material, direct labor, and overhead costs incurred during a joint production process
. A joint process is a production process in which one input yields multiple outputs.
How do you calculate joint cost?
One of the simplest methods to apportion joint cost is the average unit cost method. Here, the average cost per unit is calculated by simply
dividing the total cost of all the joint products incurred before their splitting-off
, by the total of the number of units produced all together.
Do joint costs include fixed costs?
Joint costs are production costs incurred by the firm when two or more outputs are jointly produced. … Joint costs can occur when the cost of an input is a
fixed cost
and when that input is used to produce multiple outputs either concurrently or consecutively.
Are joint costs sunk costs?
In a sense,
joint costs are sunk costs with respect to this decision
, and will not influence future processing decisions. Thus joint costs incurred prior to the split-off point are irrelevant to the decision whether to process further after the split-off point.
Is Rent a common cost?
Example of a Common Cost
The cost of rent for a production facility is
not directly associated
with any single unit of production that is manufactured within that facility, and so is considered a common cost.
What are the method for apportionment of joint costs to joint product?
There are two main methods of apportioning the common process costs at the split-off point: Physical measurement (weight or volume) of output.
Market value (sales or net realisable value) of output
. The apportionment of common process costs between joint products is arbitrary whichever method is used.
Are co product and joint product same?
A
joint product is manufactured consciously and simultaneously along with the main product
, whereas the by-product is simply an incidental result of the manufacturing of the main product.
What are the features of joint products?
- The value of all the joint products is more or less the same.
- Such products don’t necessarily require processing after a point of separation. …
- Such products need simultaneous standard processing.
- The raw material or materials they use are the same.
What is joint products and by products?
A joint cost is
a cost that benefits more than one product
, while a by-product is a product that is a minor result of a production process and which has minor sales. … The point at which the business can determine the final product is called the split-off point.
Why is joint product costing important?
There are several important reasons why you spend time figuring and allocating joint costs: …
You need to calculate joint costs to calculate inventoriable costs
. Those costs are attached to inventory and expensed when the product is sold. So you need joint costs to calculate inventory values and the cost of goods sold.
Are petrol and diesel joint products?
Examples of joint products are
gasoline
, diesel, kerosene, lubricants, tar, paraffin and asphalt obtained from crude oil.
What are prime costs?
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.
