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corporation manufactures three products from a joint process

The joint cost is the start of the process and the joint product is the final stage of the process. The following steps help to allocate the joint cost based on the sales value of the product. Co-products are when different varieties of products are produced from the process. The requirement of the material, the pattern of usage, and the way the process may be different for the production of the different co-products. After the split-off point, the products can be further processed individually. For instance, different products are obtained from milk that, includes cheese, cream, butter, etc.

VIETNAM BUSINESS NEWS JUNE 18/2023 – VietNamNet

VIETNAM BUSINESS NEWS JUNE 18/2023.

Posted: Sun, 18 Jun 2023 06:02:00 GMT [source]

Balancing costs in relation to selling or processing materials further will depend on how the other aspects of production are performing. Learn more about whether to sell or process materials further, considering relevant costs, making a decision and relevant examples. The joint products are separated from each other once the split-off point is reached in the run of a process. The business does not have to consider the production of the bed to fulfill the order for the chair, as the two products are not dependent on each other. On the contrary, the production of one joint product is dependent on the production of another joint product.

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Profit refers to the financial profit or the bookkeeping profit which states the net income or the aggregate revenue less the explicit costs. The following steps help to allocate the joint cost based on the gross margins of the product. If the resources consumed in the process are of food quality, the output is expected to be of better quality. For instance, the furniture business may produce different types of furniture that include beds, chairs, tables, sofas, and many other items manufactured from the process. If the products obtained are of different significant values, the product with the greater value is the main product and the product with the less value is a by-product/secondary product.

corporation manufactures three products from a joint process

We must compare the incremental sales revenue to the separable processing costs to find the answer. This method of cost allocation is suitable where the sales price is not available for the products on the split-off point. Hence, the business can’t produce a single product when the process is for the production of a joint product. On the contrary, the co-products can be processed at the will of the business. 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.

The Company has a joint process, which produces three products called X, Y, and Z. Each product…

Product-A is sold for USD 12,000, and product B is sold for USD 14,000. Consider a business carrying out the process requiring the joint cost amounting to USD 10,000. The products do not have selling prices at the time of split-off points. To be a joint product, the products obtained from the process must be of equal value without significant differences.

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. The resulting product has total sales worth equivalent to USD 10,000, USD 15,000, https://turbo-tax.org/tax-dates-and-deadlines-in-2021/ and USD 12,000 for product-A, product-B, and product-C, respectively. The cost allocation based on the sales value can be carried out as follows. Both products have to be processed after the split-off point with the cost of USD 5,000 for each product.

material that it processes results in three joint products: Larco, Marco, and Narco. Each

In a processing further decision, the decision-making point is often the split-off point for joint products. At this point, the joint processing costs have been incurred and cannot be avoided. They are therefore sunk costs that are not relevant in the analysis of the options.

  • Consider a business carrying out the process requiring the joint cost amounting to USD 10,000.
  • Both products have to be processed after the split-off point with the cost of USD 5,000 for each product.
  • For instance, the furniture business may produce different types of furniture that include beds, chairs, tables, sofas, and many other items manufactured from the process.
  • We must compare the incremental sales revenue to the separable processing costs to find the answer.
  • The business does not have to consider the production of the bed to fulfill the order for the chair, as the two products are not dependent on each other.

The Company has a joint process, which produces three products called X, Y, and Z. Each product may be sold at split-off or processed further and then sold. Two methods are mostly used to allocate the cost to the joint products. These methods of cost allocation include allocation based on the gross margins and the allocation based on the sales values of the joint products. The cost can be allocated for the joint products after the split-off point has been achieved.