ACCOUNTING FOR JOINT AND BY-PRODUCT
 When two or more different products are manufactured in the same production process it is called a
Joint production process.
 The major products resulting from a joint production process are called Joint products.
 A products yield in joint production process with a relatively small value is a by – products.
 The costs incurred in the joint production process which is common to all products are called Joint
costs.
 The split-off point is the point in the production process where the products become identifiable,
and as a result of their separate identity, their production costs can be measured separately.
 All costs incurred beyond the split-off point that is assignable to one or more individual products are
called separable costs.
METHODS OF ALLOCATING JOINT COSTS
1. Allocate joint costs using market value
a. Sales Value at Split off – allocates joint costs to joint products on the basis of the relative
sales value at the split off point.
b. Approximated Net Realizable Value- allocates joint costs to joint products on the basis of
relative estimated NRV(Final sales value minus the expected separable costs)
c. Net Realizable Value at Split-off- allocates joint costs on the basis of estimated realizable
value at split-off point.
d. Constant Margin Approach- allocates joint costs in such a way that the overall gross margin
percentage is identical for the individual products.
2. Allocate joint costs using physical measure
a. Units of Production Method-allocates joint costs based on the number of units produced.
(Average Unit Cost Method)
b. Weighted Average Method-allocates joint costs based on the weight, units or other
measure.
ACCOUNTING FOR BY PRODUCTS
1. By-products are accounted during production (Net Realizable Value approach) - NRV of the
by-products is treated as a reduction from the joint costs of the main products. Any loss of the
by-products or scrap is added to the cost to the cost of the main products
2. By-products are accounted during sale (Realizable Value approach) – The realized value of
the by-products or scrap maybe reported as other sales revenue or other income.
We can classify joint products into two (depending on their value and significance):
1. MAIN products
2. BY-products
MAIN products / joint products
-
BY-products
sila ang main characters. sila ang dahilan kung
-
parang extra lang sa isang story.
bakit nagpoproduce ang company.
*na-incur na joint cost ay iaalocate natin sa Joint products / main or major products.
EXAMPLE: Broiler Chicken

Joint/Major Products = thigh, leg, breast, wings

By-Products = liver, heart, Adidas, gizzard, neck, isaw, ulo, nuggets, iwi, backbones, Betamax
Split-off Point nitong Broiler Chicken = when dressed / kinatay
Before split-off point
-
At split-off point
may common or joint costs
-
may naghihiwalay = joint
After split-off point
-
may separable costs
products
Separable Costs / Additional Cost – cost incurred para ma-improve ang product or the joint product
Ex: Chicken Breast = ginawang Chicken cordon bleu ; Chicken thigh = inasal
**May costs na naincur and ang tawag don Separable costs.
METHODS OF ALLOCATING JOINT COSTS
1. Allocate joint costs using market value
a. Sales Value at Split off

Kapag nadressed or nakatay na ‘yong chicken, iyong joint/major products niya ay
magkakaiba-iba ang prices.

Computations:
 If hindi given ang Sales Value at Split-off point, simply;
 Units Produce x Unit Sales Price = Sales Value at Split-off / per product
 Then i-total mo ang Sales Value at Split-off = Allocation Base for making ratio / percent
 Then, gawa ka ng ratio percent
o (Sales Value at Split-off per product / Total Sales Value at Split-off) = ratio / percent

Gawin sa bawat unit then multiply sa allocated Joint Cost

Makukuha na ang ALLOCATED JOINT COST sa bawat product produced

Dapat mag-equal sa Joint Cost ang Allocated Joint Cost kapag tinotal ang per
product
b. Approximated Net Realizable Value - hypothetical

Final sales value minus the expected separable costs

Workback

Check if may Final Sales price or may additional separable cost para magamit ito
 Computations:
o Dapat malaman ang ESTIMATED NRV or HYPOTHETICAL SALES VALUE
o Para makuha ang Estimated NRV that is (Final Sales Value – Additional Cost)

Additonal Cost / Separable Cost
o If may Estimated NRV or Hypothetical Sales Value na per unit, i-total na ‘yon then ayon
na ang Allocation base for ratio making

(Estimated NRV per product produced / total Estimated NRV) = ratio / percent

If may ratio na, i-multiply lang sa Total joint costs then makukuha na ang
ALLOCATED JOINT COST (per product) wherein kapag tinotal ay equal sa Total
Joint cost.
c. Net Realizable Value at Split-off

Ibibigay ng problem ang NRV

Check if may NRV para magamit ito
 Computations:
o I-total ang NRV then ayon ang gagamitin na allocation base

(NRV – per product / Total NRV) = ratio percent

Then, i-multiply sa total allocated joint cost para makuha ang ALLOCATED JC per
product
d. Constant Margin Approach

Pinakamahirap daw
 Computations:
o First, Total Revenue – Joint Cost – Separable Cost = TOTAL GROSS MARGIN

Total Revenue (total ng Final Sales Value ng bawal product na na-produce)

Joint Cost (binigay na ni problem ‘yan, total joint cost to be allocated)

Separable Cost (binigay na rin ni problem ‘yan)

Total Gross Margin (‘yong total i-divide sa Total Revenue para makuha ang
percentage ng Gross Margin na ‘yan)
o Second, Total Sales – Gross Margin (percent) = COST OF GOODS SOLD / total prod
cost

Total / Final sales ng bawat product ay i-multiply sa percent ng Gross Margin para
makuha ang COGS
o Third, Cost of Goods Sold – Separable Cost = ALLOCATED JOINT COST

So, C0GS minus Additional or Separable Cost makukuha na ang allocated joint cost,
and kapag ni-total ang allocated joint cost, mag-eequal siya sa Total Joint cost na
binigay ng problem.
Step1
Step 2
Final Sales Value of the
Final Sales Value of the
total Production
Product
less: total Cost (JC+AC)
Deduct: Gross Margin
= Gross Margin
(based on the GM rate)
Gross Margin Rate
= Total production cost
(overall)
Step 3
Checking
Total production cost
Final Sales Value
deduct: separable cost
less: Separable cost
(AC)
less: allocated joint cost
= Allocated Joint Cost
= Gross Margin
2. Allocate joint costs using physical measure
a. Units of Production Method (Average Unit Cost Method)

Computations:
 Units produced / Total Units Produced
o Gawin sa bawal product produced then multiply sa Total Joint Cost to be allocated

Makukuha na ang ALLOCATED JOINT COST
b. Weighted Average Method

Computations:
 Units Produce x Point (weight) = Weighted Point
 I-total ang Weighted point, then ayon na ang allocation base
o (Weighted point – per product / Total Weighted Point) = ratio / percent

‘yong makukuhang ratio or percent i-multiply siya sa Total Allocated Joint Cost

Ration x Total Allocated Joint Cost = Allocated Joint Cost (per product)
o Mag-equal dapat sa total allocated joint cost ang allo. Jc per product