Joint Item and By-Item Costing.


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Cleanser making Soap and glycerine. Assembling: Cement Concrete funnel ... In settling on choices in respect to mutually created articles, it must be recollected ...
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Slide 1

Joint Product and By-Product Costing

Slide 2

Joint Production Process Pork Meat Material: Hog Processing Hides Split-Off Point

Slide 3

Joint Production Process Joint items are two or more items delivered at the same time by the same procedure up to a "split-off" point. The split-off point is the time when the joint items get to be isolated and identifiable. Distinguishable expenses are effectively followed to individual items and offer no specific issue.

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The refinement amongst joint and by-items lays exclusively on the relative significance of their business esteem. A by-item is an auxiliary item recuperated over the span of assembling an essential item.

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By-items can be described by their relationship to the primary items in the accompanying way: By-item coming about because of scrap, trimmings, et cetera, of the fundamental items in basically nonjoint item sorts of endeavors (e.g., fabric trimmings from garments pieces). Scrap and other buildup from basically joint item sorts of procedures (e.g., fat trimmed from hamburger corpses). A minor joint item circumstance (organic product skins and trimmings utilized as creature food).

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Examples of Joint Products and By-Products Industry Joint Products and By-Products Agriculture and Food Industries: Flour milling Patent flour, clear flour, bran, and wheat germ Extractive Industries: Copper mining Copper, gold, silver, and other metals Chemical Industries: Soap making Soap and glycerine Manufacturing: Cement Concrete pipe and total See Exhibit 7-3 on page 251

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Accounting For Joint Product Costs Benefits-Received Approaches These strategies are best at whatever point physical units are communicated as far as warmth substance, volume or weight. Distribution Based on Relative Market Value Relative Market Approaches are utilized at whatever point an individual joint item can retain joint expenses. The supposition of this methodology is that expenses would not be caused unless the together delivered items (as a gathering) take care of all expenses and return a benefit.

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Accounting For Joint Product Costs (see page 250) Benefits-Received Approaches (pages 251-253) Physical Units Method Weighted Average Method

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Accounting For Joint Product Costs Physical Units Method A sawmill forms sign into four evaluations of timber totaling 3,000,000 board feet as takes after: Percent Joint Cost Grades Board Feet of Units Allocation First and second 450,000 0.15 $ 27,900 No. 1 common 1,200,000 0.40 74,400 No. 2 common 600,000 0.20 37,200 No. 3 common 750,000 0.25 46,500 Totals 3,000,000 $186,000

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Accounting For Joint Product Costs Weighed Average Method A peach canning processing plant buys $5,000 of peaches and grades and jars them by quality. The accompanying information relates to this operation: Number Weight Weighted No. Apportioned Grades of Cases Factor * of Cases Percent Joint Cost Fancy 100 1.30 130 0.21667 $1,083 Choice 120 1.10 132 0.22000 1,100 Standard 303 1.00 303 0.50500 2,525 Pie 70 0.50 35 0.05833 292 Totals 600 $5,000 * Includes components like measure of material utilized, trouble to fabricate, time expended, contrast in kind of work utilized, and size of unit.

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Accounting For Joint Product Costs Allocations Based on Relative Market Value Sales-Value-at-Split-Off Method Net Realizable Value Method Constant Gross Margin Percentage Method Sales-to-Production Ratio Method

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Accounting For Joint Product Costs Sales-Value-at-Split-Off Method Using the timber plant case from prior - Price at Actual Percent Quantity Split-Off Sales of Total Allocated Produced (per 1,000 Value at Market Joint Grades (board ft.) board ft.) Split-Off Value Cost First and second 450,000 $300 $135,000 0.2699 $ 50,201* No. 1 common 1,200,000 200 240,000 0.4799 89,261 No. 2 common 600,000 121 72,600 0.1452 27,007 No. 3 common 750,000 70 52,500 0.1050 19,530 Totals 3,000,000 $500,100 $185,999 ** *Total joint expense is $186,000. $186,000 X .2699 ( $135,000/$500,100) = $50,201 **Note: Does not indicate $186,000 because of an adjusting blunder

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Accounting For Joint Product Costs Net Realizable Value Method An organization fabricates two items, Alpha and Beta, from a joint procedure. One creation run costs $5,750 and brings about 1,000 gallons of Alpha and 3,000 gallons of Beta. Neither one of the products is marketable at the split-off point, yet should be further prepared. The distinguishable expense for Alpha is $1 per gallon and for Beta is $2 per gallon. short Further = Hypothetical x = Hypothetical Allocated Market Processing Market Number Market Joint Price Cost Price of Units Value Cost* Alpha $5 $1 $4 1,000 $ 4,000 $2,300 Beta 4 2 2 3,000 6,000 3,450 $10,000 $5,750 * $4,000/$10,000 * $5,750 = $2,300

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Accounting For Joint Product Costs Alpha Beta Eventual business sector value $ 5,000 $12,000 Less: Gross edge at 25% of business sector value 1,250 3,000 Cost of merchandise sold $ 3,750 $ 9,000 Less: Separable costs 1,000 6,000 Allocated joint costs $2,750 $ 3,000 Constant Gross Margin Percentage Method Calc. %age Revenue ($5 x 1,000) + ($4 x 3,000) $17,000 100 % Costs [$5,750 + ($1 x 1,000) + ($2 x 3,000)] 12,750 75 % Gross margin $ 4,250 25 %

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Accounting For Joint Product Costs Sales-to-Production Ratio Method Sales-to-% of % of Production Calc. Costs Assigned Product Total Sales Production Ratio Percent Sales/Production A 10 10 1.0000 19.9338 % $ 199,338 B 20 15 1.3333 26.5778 % 265,778 C 15 25 0.6000 11.9603 % 119,603 D 40 30 1.3333 26.5778 % 265,778 E 15 20 0.7500 14.9504 % 149,504 100 100 5.0166 100.001 % $1,000,001 * adjusting blunder

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Accounting for By-Product Costs By-item income likewise can be dealt with as a reasoning from the expense of the fundamental item. One probability is to show net offers of by-items in the "Other Income" segment of the pay explanation.

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Effect of Joint Product Costs on Cost Control and Decision Making It is critical to comprehend when the utilization of designated joint item expenses might misdirect. In settling on choices with respect to together created articles, it must be recollected that the items are fundamentally delivered mutually . A few regions that can be influenced by joint cost assignments are: Output choices Further preparing of joint items Pricing mutually delivered items

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