JOINT PRODUCTS AND

BY-PRODUCTS

DE LEON/ DE LEON/ DE LEON

 JOINT PRODUCTION

• IS A PRODUCTION PROCESS THAT YIELDS TWO OR MORE PRODUCTS

SIMULTANEOUSLY FROM THE SAME RAW MATERIALS.
• CAN YIELD JOINT PRODUCTS AND BY-PRODUCTS.
• INCURS JOINT COST; CONSISTING OF DIRECT MATERIALS, DIRECT
LABOR AND FACTORY OVERHEAD WHICH IS NOT SPECIFICALLY
IDENTIFIABLE WITH ANY OF THE PRODUCTS BEING SIMULTANEOUSLY
PRODUCED
 JOINT PRODUCTS AND BY-PRODUCTS
JOINT PRODUCTS BY PRODUCTS

❑ The products must be the ❑ The product is not the primary

primary objective of the objective of the manufacturing
manufacturing operations. operations.

❑ Sales value must be relatively ❑ Sales value of the by-product is

high if compared with the comparatively low as compared
products resulting at the same with the sales value of the main
time period. product.
 ACCOUNTING METHODS FOR
MAIN PRODUCTS

❑PHYSICAL OUTPUT METHOD/ AVERAGE UNIT COST METHOD

❑MARKET VALUE AT SPLIT-OFF METHOD
❑NRV METHOD (APPROXIMATED MARKET VALUE AT SPLIT-OFF)
 PROBLEM # 1
1.
PROD U.P. MV/ Unit Total MV JT Cost
A 500 40 20,000 8,000
B 300 60 18,000 7,200
C 200 35 7,000 2,800
1,000 45,000 18,000
18,000/ 45,000 = 40%
2.
PROD U.P. JT Cost
A 500 9,000
B 300 5,400
C 200 3,600
1,000 18,000
18,000/ 1,000 = 18
 PROBLEM # 1
3. Points Total
PROD U.P. Assigned Points JT Cost
A 500 5 2,500 7,500
B 300 9 2,700 8,100
C 200 4 800 2,400
1,000 6,000 18,000
18,000/ 6,000 = 3
4. Weight per Total
PROD U.P. Unit Weight JT Cost
A 500 4 2,000 6,000
B 300 10 3,000 9,000
C 200 5 1,000 3,000
1,000 6,000 18,000
18,000/ 6,000 = 3
 PROBLEM # 2
1.
PROD U.P. JT Cost APC Total Cost
A 13,200 66,000 19,800 85,800
B 8,800 44,000 15,000 59,000
C 4,400 22,000 11,000 33,000
26,400 132,000 45,800 177,800
132,000/ 26,400= 5

2. Total
PROD Total SV JT Cost APC Cost
A 88,000 52,800 19,800 72,600
B 77,000 46,200 15,000 61,200
C 55,000 33,000 11,000 44,000
220,000 132,000 45,800 177,800
132,000/ 220,000= 0.60
 PROBLEM # 3

PROD SALES APC NRV % JT Cost GP

A 115,000 30,000 85,000 80% 68,000 17,000
B 10,000 6,000 4,000 80% 3,200 800
C 4,000 4,000 80% 3,200 800
D 30,000 1,000 29,000 80% 23,200 5,800
159,000 37,000 122,000 97,600 24,400

97,600/ 122,000= 80%

PROD U.P. USP TSP JT Cost GP

A 500,000 0.15 75,000 65,946 9,054
B 10,000 0.50 5,000 4,396 604
C 5,000 0.80 4,000 3,517 483
D 9,000 3.00 27,000 23,741 3,259
524,000 111,000 97,600 13,400
 PROBLEM # 4

Total Unit
PROD U.P. USP TSP APC NRV JT Cost Cost Cost
M 1,500 10 15,000 3,000 12,000 8,400 11,400 7.60
N 2,500 12 30,000 2,000 28,000 19,600 21,600 8.64
O 1,000 15 15,000 5,000 10,000 7,000 12,000 12.00
5,000 60,000 10,000 50,000 35,000 45,000

Actual Cost of Inventory

PROD Sales Sales Gross Profit Value
M 12,000 9,120 2,880 (300*7.60) 2,280
N 24,000 17,280 6,720 (500*8.64) 4,320
O 12,000 9,600 2,400 (200*12) 2,400
48,000 36,000 12,000 9,000

35,000/50,000= .70
 ACCOUNTING FOR BY-PRODUCT

CATEGORY 1: in which by-products are recognized when sold.

The net revenue may be presented on the income statement as:
❑ Other income
❑ Additional sales revenue
❑ A deduction from the cost of goods sold of the main product
 ACCOUNTING FOR BY-PRODUCT
CATEGORY2: in which by-products are recognized when produced.
Shown on the I/S as a deduction from the total production cost

1. Net realizable value method – under this method, the

expected sales value of the by-product produced is reduced by
the expected additional processing costs and marketing and
administrative expenses.

1. Reversal cost method – under this method, the expected value

of the by-product produced is reduced by the expected
additional processing costs, selling and administrative expenses
and normal gross profit of the by-product.
 PROBLEM # 5
Total Joint Production Cost P 204,000
Less:NRV of by-Products:
Est. SP(6*2,000) 12,000
Less:
APC (2*2,000) 4,000
EXP (1*2,000) 2,000
NPM (1*2,000) 2,000 8,000 4,000
net joint cost allocated to main
products P 200,000

Allocated using the NRV-M NRV

X 8,000 * (20-5) 120,000 80,000
Y 10,000 *(25-7) 180,000 120,000
TOTAL NRV 300,000 200,000
 MULTIPLE CHOICE
1. C
Joint
PROD U.P. SP Total MV APC NRV Cost
A 8,500 6 51,000 10,200 40,800 22,440
B 9,700 5 48,500 19,400 29,100 16,005
C 6,900 4 27,600 6,900 20,700 11,385
90,600 49,830
49,830/ 90,600= 0.55

2. B
Product A Product B Product C
Share in the joint cost 22,440
16,005 11,385
Cost after split-off 10,200 19,400 6,900
Total cost 32,640 35,405 18,285
3.A

Total cost 32,640 35,405 18,285

Divide by units produced 8,500 9,700 6,900
Cost per unit 3.84 3.65 2.65
Multiply by units sold 8,400 9,700 6,400
Cost of sales 32,256 35,405 16,960

4. B

Cost Per Unit 49,830/ 25,100 = P 1.985

5. A

PROD KGS SV/KG Total SV JT Cost

A 4,000 11 44,000 22,880
B 3,000 10 30,000 15,600
C 1,000 26 26,000 13,520
100,000 52,000
Rate 52,000/ 100,000= 0.52
6. B Cost/kg= 22,880/4,000 = 5.72

1. PROD Sales Value APC NRV JT Cost

A 245,000 200,000 45,000 30,000
B 30,000 30,000 20,000
C 175,000 100,000 75,000 50,000
150,000 100,000
100,000/ 150,000= 2/3
 7. C

PROD Sales Value APC NRV JT Cost

A 245,000 200,000 45,000 26,250
C 175,000 100,000 75,000 43,750
120,000 70,000
(45,000/ 120,000) * 70,000= 26,250
(75,000/ 120,000) * 70,000= 43,750

8. B
A 300,000 lbs. /500,000 x 100,000= 60,000
B 100,000 lbs.
C 100,000 lbs.
500,000 lbs.
9. C
TOTAL SALES ( 245,000 + 30,000 + 175,000) 450,000
LESS: JOINT COST (NEED NOT BE ALLOCATED 100,000
ADDITIONAL PROCESSING COST 300,000 400,000
NET INCOME 50,000

10. C

PROD Sales Value APC NRV JT Cost

A 9,000 3,000 6,000 4,400
B 6,000 3,000 3,000 2,200
9,000 6,600
(6,000/ 9,000) * 6,600= 4,400
(3,000/ 9,000) * 6,600= 2,200
 Classroom Drill
1. D

ABBA 16,000 X 20 = 320,000 – 160,000 = 160,000 50%

ADDA 8,000 X 50 = 400,000 – 240,000 = 160,000 50% X
300,000=150,000 320,000
2. D

R 10,000 X 19,500,000 = 10,263,157.89

19,000

S 9,000 X 19,500,000 = 9,236,842.11

19,000
3. A
UNIT COST OF R = 178,000/25,000 = 7.12
COMPUTATION OF SHARE IN CONVERSION COST
KILOS TOTAL SHARE IN PROD. PRODUCED SP MV
FPC NRV % CONVERSION COST
R 25,000 10 250,000 30,000 220,000 88,000
S 15,000 12 180,000 20,000 160,000 40% 64,000
T 10,000 15 150,000 30,000 120,000 48,000
500,000 200,000
COMPUTATION OF PERCENTAGE 200,000/500,000 = 40%
COMPUTATION OF SHARE IN MATERIAL COST AND TOTAL COST

KILOS AVERAGE SHARE IN SHARE IN TOTAL

PROD. PRODUCED COST MATERIAL COST CONVERSION FPC COST
R 25,000 60,000 88,000 30,000 178,000
S 15,000 2.40 36,000 64,000 20,000 120,000
T 10,000 24,000 48,000 30,000 102,000
120,000 200,000 80,000 400,000
THE MOST LOGICAL WAY OF ALLOCATING MATERIALS COST IS THE AVERAGE UNIT COST METHOD. THE SHARE IN
MATERIAL COST IS COMPUTED SEPARATELY BECAUSE AS PER THE PROBLEM IT IS ONLY THE CONVERSION COST THAT
IS TO BE ALLOCATED USING THE NET REALIZABLE VALUE METHOD.
4. C

SALES (15,000 KILOS X 12) 180,000

LESS: TOTAL COST (SEE COMPUTATION ABOVE) 120,000
GROSS MARGIN 60,000

5. A

SALES ( 10,000 KILOS X 15) 150,000

LESS: TOTAL COST (COST OF GOODS SOLD) 102,000
SELLING AND ADMINISTRATIVE (150,000 X 20%) 30,000 132,000
NET INCOME 18,000
6. B

PROD OUTPUT USP @FP SV @ FP A P C N R V JOINT COSTS

Bex 1,600 P50 P80,000 P25,000 P55,000 P16,500
Rom 800 100 80,000 35,000 45,000 13,500
Totals 2,400 P160,000 P60,000 P100,000 P 30,000
7. D
PROD UNITS P SV@ SOP JOINT COST
X 20,000 P300,000 P168,000
Y 20,000 150,000 84,000
40,000 P450,000 P252,000
8. C
X Y Z
SV@SOP P25,000 P41,000 P24,000
SV @ FP 42,000 45,000 32,000
Inc in SV P17,000 P 4,000 P 8,000
Incr cost 9,000 7,000 8,000
Net inc. P 8,000 P(3,000) P -

Z’s relevant unit cost (P8,000 / 2,000 units)

9. A
X only

10. A
Share in the joint cost per unit 57,000/19,000 = 3.00
Additional processing cost per unit = 0.50
Total manufacturing cost per unit 3.50