MA: joint + by-products

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  • Created by: charlie
  • Created on: 26-05-17 16:42
Joint + by product
occurs when >1 product from 1 process which can be separated and sold/ JOINT PRODUCTS: have similar sales value (crude oil) BY-PRODUCTS: minor sales value (Normal loss)
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Joint product cost apportionment: general layout
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Joint product cost apportionment: sales value (market value) +ves/ -ves
+ves: more realistic inventory valuation/ -ves: assumes sales value can be determined at split-off + determines prior costs
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Joint product cost apportionment: sales units (physical) +ves/ -ves
+ves: simple when common unit of measurement (if stock not overall material)/ -ves: distorted profit reporting (prices + costs differ between products)/ difficult to find common unit of measurement/ high vol, low value products get too many costs
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Joint product cost apportionment: NRV (market value) +ves/ -ves
+ves: shows products with +ve contn as profitable/ takes into account further processing costs where MV can't be established/ simple if only one split-off/ -ves: needs high info/ makes assumptions/ difficult if many split-off points
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Joint product cost apportionment: *Gross profit % layout
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Joint product cost apportionment: *Gross profit % +ves/ -ves
+ves: appropriate if uniform relationship between cost + sales value is valid (necessary to produce all products=all equally profitable)/ -ve: need a lot of info + to assume cst. gross profit (unprofitable products subsided by more profitable)
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By product (joint costs)
joint costs shared between joint products only (not by-products)/ sales value of by-product (FROM JOINT PROCESS ONLY) is used to reduce joint costs before apportionment/ if no value at split use the net income (future revenue less: further costs)
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Joint costs decision making
Joint costs irrelevant for decision making (incurred irrespective)/ only look at VC to produce product
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Decision making: (financial) selling at split-off + minimum price equation
GAIN: Revenue LOSE: NRV/ lowest minium acceptable price = b/e point
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Decision making: (non-financial)
(1) company (image/ staff redundancy/ motivation/ can further costs be saved?/ do we have spare capacity?) (2) customers (loss of existing base) (4) product (quality changes)
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Joint+ by-product process accounts layout
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Other cards in this set

Card 2

Front

Joint product cost apportionment: general layout

Back

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Card 3

Front

Joint product cost apportionment: sales value (market value) +ves/ -ves

Back

Preview of the front of card 3

Card 4

Front

Joint product cost apportionment: sales units (physical) +ves/ -ves

Back

Preview of the front of card 4

Card 5

Front

Joint product cost apportionment: NRV (market value) +ves/ -ves

Back

Preview of the front of card 5
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