Modul ke:
Fakultas
Program Studi
Akuntansi Biaya Costing By-Products and Joint Products
Suryadharma Sim, SE, M. Ak
09 Ekonomi dan
Bisnis
S1 Manajemen
Costing By-Products and Joint Products
By-Products and Joint Products Defined
The term by-product is generally used to denote a product of relatively small total value
produced simultaneously with a product of greater total value.
Joint products are produced simultaneously by a common process or series of processes,
with each product possessing more than nominal value in the form in which it is produced.
Many industrial concerns are confronted with the difficult and often rather complicated
problem of assigning costs to their by-products and joint products. Chemical companies,
coke manufacturers, refineries, flour mills, coal mines, lumber mills, gas companies,
dairies, canners, meat packers, and many others produce in their manufacturing or
conversion processes a multitude of products to which some cost must be assigned.
Assignment of costs of these various products enhances equitable inventory costing for
income determination and financial statement purposes. An even more important aspect of
by product and joint product costing is that it furnishes management with data for use in
planning maximum profit potentials and evaluating actual profit performance.
Costing By-Products and Joint Products
Difficulties / Problems in Costing by Products and Joint Products:
By products and joint products are difficult to cost because a true joint cost is
indivisible. For example, an ore might contain both lead and Zink. In the raw
state, these minerals are joint products, and until they are separated by
reduction of the ore, the cost of finding mining, and processing is a joint cost;
neither lead nor Zink can be produced without the other prior to the split-off
point.
The cost accumulated to the split-off point must be born by the difference
between the selling price and the cost to complete and sale each mineral after
the split-off point.
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Costing By-Products and Joint Products
Joint Products and Joint Product Cost:
Definition and Explanation of Joint Products:
Joint products are produced simultaneously by a common process or
series of processes, with each product processing more than a
nominal value in the form in which it is produced. The definition
emphasizes the point that the manufacturing process creates
products in a definite quantitative relationship. An increase in one
product's output will bring about an increase in the quantity of the
other products, or vice versa, but not necessarily in the same
proportion.
Costing By-Products and Joint Products
Definition and explanation of Joint Product Cost:
A joint product cost cay be defined as that cost which arises from the common processing or
manufacturing of products produced from a common raw material. Whenever two or more
different products are created from a single cost factor, a joint product cost results. A joint cost
is incurred prior to the point at which separately identifiable products emerge from the same
process.
Example:
For example, the production of coke, for which coal is the original raw material. In addition to
coke as its major product, the process produces sulfate of ammonia, light oil, crude tar and
gas. The greater quantity of gas is not sold but is used to fire the coke ovens and the boilers
in the power plant. The coke ovens are the split-off point for cost assignments. The cost of
each product consists of a pro rata share of the joint cost plus any separable or subsequent
costs incurred in order to put the products into saleable condition.
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Costing By-Products and Joint Products
COKE AND ITS ASSOCIATED PRODUCTS
COAL (ORIGINAL RAW MATERIAL)
COKE OVEN (SPLIT-OFF POINT)
COKE (MAJOR PRODUCT)
Plus Separable cost
COKE
SULFATE OF AMMONIA
Plus Separable cost
SULFATE OF AMMONIA
LIGHT OIL Plus Separable cost
BENZOL
CRUDE TAR Plus Separable cost
TAR
COKE OVEN GAS Plus Separable cost
GAS
Costing By-Products and Joint Products
Characteristics of Joint Products and Joint Cost:
Many products or services are linked together by physical relationships which
necessitate simultaneous production. To the point of split-off or to the point
where these several products emerge as individual units, the cost of the
products forms a homogeneous whole.
The classic example of joint products is found in the meat packing industry,
where various cuts of meet and numerous by products are processed from one
original carcass with one lump-sum cost. An other example of joint products
manufacturing is the production of gasoline, where the derivation of gasoline
inevitably results in the production of such items as naphtha, kerosene, and
distillate fuel oils.
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Costing By-Products and Joint Products
Other examples of joint products manufacturing are the simultaneous
production of various grads of glue and the processing of soybeans into oil and
meal. Joint product costing is also found in industries that must grade raw
materials before it is processed. Tobacco manufacturers (except in cases
where graded tobacco is purchased) and virtually all fruit and vegetables
canners face the problem of grading. In fact, such manufacturers have a dual
problem of joint cost allocation:
1. Materials cost is applicable to all grades
2. Subsequent manufacturing costs are incurred simultaneously for all the
different grads.
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Costing By-Products and Joint Products
By-Products:
Definition and Explanation of By Products:
The term "by product" is generally used to denote one or more products of
relatively small total value that are produced simultaneously with a product of
greater total value. The product with the greater value, commonly called the
"main product", is usually produced in greater quantities than the by products.
Ordinarily, the manufacturer has only limited control ov
