Methods of allocating Joint Costs to Joint Products

1. Market value or sales Value method

a. market value at split-off point
b. Hypothetical market value of Net Realizable Value
2. Average Unit Cost or Physical Output Method
3. Weighted Average Method (based on a predetermined standard or
index)
4. Quantitative Unit Method is based on some physical measurement such
as volume
weight, or a linear measure.

Accounting for by-product

1. No joint cost allocated to by products
Method 1.
A. Gross revenue from sales of by-product is listed in the income
statement as:
a. additional sales revenue
b. Other revenue
c. A deduction from COS of the main product
B. Deduction from the total production cost of the main product
Method 2: Net revenue from sale of by-product (Gross selling price less
cost of marketing and administrative expenses and any additional
processing cost. same as method in No.1.
2. With joint cost allocated to by-products (inventory cost of the by-product are
based on the allocated cost plus any subsequent processing costs.
Method 3: Replacement cost method
market value or reversal cost method