1. Paper F2 Management Accounting
2018/11/23

2. Chapter 12 Process costing, joint products and by products
2018/11/23

3. Allocating joint costs Accounting treatments
Chapter Preview
Process costing,
joint & by-products
Joint products
By-products
Allocating joint costs
Accounting treatments
2018/11/23
Ji Weili, JXUFE

4. Joint products and by-products
forestry
For anyone struggling to follow my train of thought here…the joint products are wood and paper, the by-products are wood shavings for your hamster cage!!
By - product
2018/11/23
Ji Weili, JXUFE

5. Joint products and by-products
Process (Joint costs)
Inputs
Product 2
By-product
This slide explains the basic ideas – the next gives more specific details
Split-off point
2018/11/23
Ji Weili, JXUFE

6. Joint products and by-products - accounting
Substantial sales value
Apportion joint costs
Various methods: as specified in question
Relatively low sales value Secondary to process
Do not allocate costs
Various methods
2018/11/23
Ji Weili, JXUFE

7. Joint Costs
A single cost incurred in producing or purchasing two or more different products.
Similar to an indirect expense since it is shared among more than one cost object.
Example: The cost of crude oil is a joint cost for many petrochemical products.
2018/11/23
Ji Weili, JXUFE

8. Allocating Joint Costs
Allocation
If we allocate the joint costs of raising the animal to the two products based on weight, which product would receive the largest cost allocation?
Hamburger, because there is more of it.
2018/11/23
Ji Weili, JXUFE

9. Allocating Joint Costs
Allocation
If we allocate the joint costs of raising the animal to the two products based on sales value, would the steak receive a greater portion of the cost allocation?
Yes, steak has a higher sales value than hamburger.
2018/11/23
Ji Weili, JXUFE

10. Allocating Joint Costs on a Value Basis
Product One Sales value = $80,000
$200,000 Joint Cost
Product Two Sales value = $200,000
Product Three Sales value = $120,000
Allocate the $200,000 joint cost based on sales value.
2018/11/23
Ji Weili, JXUFE

11. Allocating Joint Costs on a Value Basis
2018/11/23
Ji Weili, JXUFE

12. Joint products in process accounts
Example: P
Data for the period are as follows.
process process 2
Direct material(3000units) $ /
Conversion costs $ $
Normal loss % of input
Scrap value of normal loss $ $2
Output (units) A
7 000 B
6 000 C
2018/11/23
Ji Weili, JXUFE

13. Accounting for by-products
The sales of the by-product may be treats as:
Added to sales of the main product
Treated as a separate, incidental source of income
Deducted from the cost of production or cost of sales of the main product
Net realisable value of the by-product may be deducted from the cost of production of the main product
Example: P
2018/11/23
Ji Weili, JXUFE

14. End of Chapter 11
2018/11/23
Ji Weili, JXUFE