JOINT COST

DEFINITON OF JOINT COST

• Joint cost or joint overhead cost which has to be
allocated to some departments, to the factory that
produce based on orders or to the factory that produce
mass production.
• Joint product cost is a cost that established when the
raw material first being processed until it become
various kind of products.
• Joint product cost consist of raw material cost, labor
cost, and factory overhead cost.
 COMMON COST JOINT COST

• The cost to produce two • Include raw material

or more separate cost, direct labor cost,
products (not produced and factory overhead
together) with the same cost.
facilities at the same • Incurred to process raw
time material into different
• Doesn’t include raw types of product which
material cost and direct can be a joint product,
labor cost by-product, and co-
product
TYPES OF PRODUCTS
1. Joint product
• Two or more product which is produced simultaneously with a
series of processes.
• The sale value of each joint product is relatively the same, so
there is no products that is considered as the main product or the
by-product.
2.By-product
• One or more product that has a lower sale value, which is
produced together with other products that has higher sale value.
• The main difference between joint and by product is based on the
relative selling value.
TYPES OF PRODUCT
3. Co-product
• Two or more product which is produced at the same time,
but not from the same processing nor the same material.
CHARACTERISTICS OF JOINT PRODUCT, BY-
PRODUCT, AND CO-PRODUCT
Joint product and co-product have characteristics such as:
• Joint product and co-product is the main goal of production activity
• The selling price of joint product or co-product is relatively high compared
to by-product which is produced at the same time
• In producing certain joint product, the producer cannot avoid to produce
all of the joint products, if he only want to produce only one of the joint
products.

By-product can be categorized based on the possibilities of that product to

be sold separately or not from the main product.
• By-product that is sold separately from the main product, that doesn’t
need further processing
• By-product that needs further processing after it is separated from the
main product.
JOINT COST
ACCOUNTING
JOINT COST ACCOUNTING
• Company that produce joint products commonly encounter a
marketing problem, because each products certainly have
different marketing problems and different selling price.
• We need to know a part of all of the production cost which is
charged to each joint product
• Joint cost can be allocated into each joint procuts using one of
the four methods:
1. Relative selling value method
2. Physical unit method
3. Average cost per unit method
4. Weighted average method
1. RELATIVE SELLING VALUE METHOD
• This method is commonly used to allocate joint cost
to joint products
• Based on this method, the logical way to allocate the
joint product is based on the relative selling value of
each joint product
1. RELATIVE SELLING VALUE METHOD
EXAMPLE #1 :
The joint cost that is alocated by PT. El Sari in one
period is Rp. 750.000. The amount and the selling
price of each product is stated in table below
1. RELATIVE SELLING VALUE METHOD
• EXAMPLE #2 :
Variation of relative selling value method is used when one or some
joint product needs additional processing cost after spit-off.
Therefore, when split-off, the joint product have not got a sell
value.
1. RELATIVE SELLING VALUE METHOD
EXAMPLE #3 :
The joint cost in one period is Rp. 3.000.000. Product
A after being split off from product B needs seperable
cost in the amount of Rp. 100/kg
2. PHYSICAL UNIT METHOD
• Determine the cost of joint products based on the
benefit that is determined of each end product
• In this method, the joint cost is allocated to the
product on the basis of physical coefficient which is the
quantity of raw material contained in each product.
• The joint product that is produced have to be
measurable with the same unit of measurement
2. PHYSICAL UNIT METHOD
EXAMPLE :
10.000 barrels of crude oil is processed in refinery. The
production result after reduced by the loss is 200
barrels
2. PHYSICAL UNIT METHOD
If the percentage above is equal in every production
process, therefore this also can be used to allocate
raw material cost that will be used