In joint process, one product line cannot be manufactured
without producing others. Operations Manager – minimize or cancel wastes Cost Accountant – provide reports on where costs and wastes might be reduced The total cost incurred for material, labor, and overhead during a joint process is called the joint cost of the production process Joint products/primary products/main products/co-products Key outputs of a joint process By-products and Scrap Incidental outputs of a joint process Both are salable Waste Final residual output which has no sales value Point at which joint process outputs are first identifiable as individual products A joint process can have one or more split-off points. Joint costs include all direct material, direct labor and overhead costs incurred up to the split-off point. Before committing resources to a joint process, management’s first decision is whether total expected revenue from selling the joint output “basket” of products is likely to exceed total expected processing costs: Joint cost Separate processing costs after split-off Selling expenses for the goods Disposal costs for any waste materials INCREMENTAL REVENUE Physical Measure Allocation Monetary Measure Allocation Sales Value at Split-off Net Realizable Value at Split-off Approximated Net Realizable Value at Split-off Joint Tons Sales Price Mktg Cost Sep Cost per Final Sales Product Produced per Ton at per Ton Ton if Price per Ton Split-off Regardless processed when Sold Further
Breast 3,800 $2,800 $200 $100 $3,200
Ground 2,400 1,800 100 100 2,100
Whole 2,800 1,200 50 60 1,500
Joint Tons Sales Price Total Sales Allocated Total Product Produced per Ton at Value at Joint Cost Allocated Split-off Split-Off per Ton Joint Cost
Breast 3,800 $2,800 $10,640,000 $600 $2,280,000
Ground 2,400 1,800 4,320,000 600 1,440,000
Whole 2,800 1,200 3,360,000 600 1,680,000
Total 9,000 $18,320,000 $5,400,000
Joint Tons Sales Price Total Sales % of Joint Cost Total Allocated Product Produced per Ton at Value at Total Allocated Joint Cost Split-off Split-Off Sales Val Joint Cost per Ton Breast 3,800 $2,800 $10,640,000 58% $5,400,000 $3,132,000 $824.21 Ground 2,400 1,800 4,320,000 24 5,400,000 1,296,000 540.00 Whole 2,800 1,200 3,360,000 18 5,400,000 972,000 347.14 Total 9,000 $18,320,000 $5,400,000 Joint Tons NRV per Total NRV % of Joint Cost Total Allocated Product Produced Ton at at Split-off Total Allocated Joint Cost Split-off NRV Joint Cost per Ton Breast 3,800 $2,600 $9,880,000 57% $5,400,000 $3,078,000 $810.00 Ground 2,400 1,700 4,080,000 24 5,400,000 1,296,000 540.00 Whole 2,800 1,150 3,220,000 19 5,400,000 1,026,000 366.43 Total 9,000 $17,180,000 $5,400,000 Joint Tons NRV per Total NRV % of Joint Cost Total Allocated Product Produced Ton at at Split-off Total Allocated Joint Cost Split-off NRV Joint Cost per Ton Breast 3,800 $2,900 $11,020,000 57% $5,400,000 $3,078,000 $810.00 Ground 2,400 1,900 4,560,000 23 5,400,000 1,242,000 517.50 Whole 2,800 1,390 3,892,000 20 5,400,000 1,080,000 385.71 Total 9,000 $19,472,000 $5,400,000 Net Realizable Value (NRV) Approach Reduce WIP-Joint Products Reduce COGS Realized Value Approach Present as Other Revenue Present as Other Income Particulars Values Total processing for the month 10,000 tons of Turkey Total tons of output 9,000 tons of Joint Products By-products from joint product 1,000 tons / 2M pounds production SP per pound of by product $0.30 Processing costs per pound of by $0.08 for Labor and $0.02 product for OH NRV per pound of by product $0.20 Sales $ 7,200,000 COGS Beg. FG $ 0 CGM ($5.4M-$400T) 5,000,000 CGA $ 5,000,000 Ending FG (277,500) (4,722,500) Gross Margin $ 2,477,500 Operating Expenses (1,600,000) Income from Principal Operations $ 877,500 Other Income Royalties 80,000____ Income Before Income Taxes $ 957,500 Sales $ 7,200,000 COGS Beg. FG $ 0 CGM 5,400,000 CGA $ 5,400,000 Ending FG (300,000) Unadjusted CGS 5,100,000 NRV of by-product (400,000) 4,700,000 Gross Margin $ 2,500,000 Operating Expenses (1,600,000) Income from Principal Operations $ 900,000 Other Income Royalties 80,000____ Income Before Income Taxes $ 980,000 Sales $ 7,200,000 Other Revenue (by-product sales) 600,000 Total Revenue $ 7,800,000 COGS Beg. FG $ 0 CGM 5,400,000 CGM of by product 200,000 CGA $ 5,600,000 Ending FG (311,000) (5,289,000) Gross Margin $ 2,511,000 Operating Expenses (1,600,000) Income from Principal Operations $ 911,000 Other Income Royalties 80,000____ Income Before Income Taxes $ 991,000 Sales $ 7,200,000 COGS Beg. FG $ 0 CGM 5,400,000 CGA $ 5,000,000 Ending FG (300,000) (5,100,000) Gross Margin $ 2,100,000 Operating Expenses (1,600,000) Income from Principal Operations $ 500,000 Other Income Royalties 80,000 By Product Sales 400,000 Income Before Income Taxes $ 980,000 CREATING A BETTER LEARNING EXPERIENCE JBCG
Average Payable 365 Average Payable Period Annual Purchase Average Inventory 365 Inventory Holding Period Cogs Average Receivable 365 Receivable Collection Period Annual Sales