Joint Product & By-product Examples
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Allocation of Cost to by-Product Z by Reversal Cost Method
Operating Profit per unit Add: Operating Expenses: Marketing and Administrative expenses per unit
1 1
GROSS PROFIT per unit
2
Sales price per unit Less: Gross profit per unit
5 (2)
COST OF GOODS SOLD per unit
3
Less: Further processing cost per unit
(1)
COST OF GOODS SOLD per unit (at split off point)
2
Cost of Z Product = 2,000 units x Rs. 2 = Rs 4,000
ALLOCATION OF JOINT PRODUCT COST TO X and Y (by Market value method. Product
Ultimate MV / unit
Nos. of units produced
Ultimate Market Price
Processing cost
Hypothetical Market value
X
20
8,000
160,000
40,000
120,000
Y
25
10,000
250,000
70,000
180,000 300,000
Allocation of Joint Production Cost to X and Y is now Rs. 200,000 because Rs. 4,000 charged to Product Z which deduct from total cost of Rs. 204,000
Allocation %
w Rs. 200,000 duct from total
Allocation of Joint cost
40
80,000
60
120,000 200,000
Required no. 1: Market Value method Product
Units
Sales price per unit
Total Market Value
Allocation %
Buildon
6,000
2.20
13,200
36.67
Buildeze
8,000
1.25
10,000
27.78
Buildrite
10,000
1.28
12,800 36,000
35.56 100
Required no. 2: Weighted Average method Product
Units
Weight per unit
Weighted Units
Allocation %
Buildon
6,000
6
36,000
33.33
Buildeze
8,000
4
32,000
29.63
Buildrite
10,000
4
40,000 108,000
37.04 100
Appropriation of Joint Production cost 7,920 6,000 7,680 21,600
Appropriation of Joint Production cost 7,200 6,400 8,000 21,600
Required no. 1: Average unit cost method
Product Unit Produced
Allocation %
Allocation of Joint production cost
Additional Cost
Total Cost
X
6,000
50.00
30,000
9,000
39,000
Y
4,000
33.33
20,000
7,000
27,000
Z
2,000 12,000
16.67 100
10,000 60,000
5,000 21,000
15,000 81,000
Required no: 2: Market Value method
Total joint production cost Units Sales price at split off A B C D
20,000 15,000 10,000 15,000
120,000
0.25 3.00 3.50 5.00
ALLOCATION OF JOINT PRODUCTION COST (AT SPLIT OFF POINT) Joint Product
No. of units produced
A B C D
Sales price at split off
20,000 15,000 10,000 15,000
Total
Total M. Value
0.25 3.00 3.50 5.00
A
Percentage
5,000 45,000 35,000 75,000 160,000
B
Allocation of Joint cost
3.125 28.125 21.875 46.875 100
C
3,750 33,750 26,250 56,250 120,000
D
Total units
60,000
20,000
15,000
10,000
15,000
Sales (in units)
52,000
18,000
12,000
8,000
14,000
8,000
2,000
3,000
2,000
1,000
138,500
4,500
36,000
28,000
70,000
Cost 120,000 Less: ending inventory (16,125)
3,750 (375)
33,750 (6,750)
26,250 (5,250)
56,250 (3,750)
COGS
103,875
3,375
27,000
21,000
52,500
34,625
1,125
9,000
7,000
17,500
25
25
25
25
25
Ending units Sales (in value)
Gross Profit GP percentage
ALLOCATION OF JOINT PRODUCTION COST (AFTER SPLIT OFF POINT SALES VALUE)
Product
Ultimate M.V per unit
A B C D
Unit Produced
0.50 5.00 4.50 8.00
20,000 15,000 10,000 15,000
Section A
Sat
8:30 -10
Section B
Sat
10- 11:30
Ultimate M.V
10,000 75,000 45,000 120,000 250,000
Processing Cost after split off point 2,000 10,000 10,000 28,000 50,000
Hypothetical Market Value 8,000 65,000 35,000 92,000 200,000
0.19 2.25 2.63 3.75
% of Joint Cost Allocation 4.00 32.50 17.50 46.00 100
Allocation of Joint Production Cost 4,800 39,000 21,000 55,200 120,000
Total Cost
6,800 49,000 31,000 83,200 170,000
Dept no.1:
Dept no.2
Input
110,000
Receiving from dept 1
Cost
120,000
Additional cost
66,000 38,000
19,800 BETA (30% of 66,000 units)
No additional cost & Joint produc Market expenses Sales value 1.20 per unit
46,200 APLHA Transfer to Dept 4 (70% of 66,000 units) Additional cost Sale value Dept No. 3 Receiving from dept 1
23,660 Rs. 5 / unit
44,000 (40 % of input in dept 1) (4,000) (10% of good output) 40,000 Good output
Additional cost
165,000 Sales value 12 per unit
Let good output is X Input - Loss = Good output 44000 - 0.1 of x = x 44000 = x + 0.1 x 44000 = 1.1 x x = 44000 / 1.1 X = good out put = 40,000 units Req no: 1 Allocation of Joint Production Cost
Product
M.V. per unit
Aplha
Gamma
Nos. of units produced
Market Value
Processing Cost
Hypothetical M.V
5
46,200
231,000 15,660
38,000 23,660
185,000
37
12
40,000
480,000
165,000
315,000 500,000
63 100
W-1: Calculation of net realizable value method Sales revenue of Beta (19,800 units x 1.20) Less: Marketing expenses Net Realizable Value of beta
23,760 (8,100) 15,660
Required no: 2: Gross profit of Alpha Sales
Allocation %
(48,000 x 80% = 38,400 units x Rs. 5)
Less: Production Cost Joint cost allocation to Alpha Additional cost: Department no. 2 Department no. 4
102,000 38,000 23,660
61,660
Total Production Cost Less: Net Realizable value of beta
163,660 (15,900)
Net Production Cost Less: Ending inventory
147,760 (29,552) COST OF GOODS SOLD Gross Profit
W-1
W-2
Net realizable value of beta Sales value of Beta Less: Marketable value NRV
24,000 (8,100) 15,900
Cost of ending inventory Cost of ending inventory = Net production cost x % of ending inventory =147,760 x 20% 29,552
(60 % of input in dept 1)
o additional cost & Joint production cost arket expenses 8,100 ales value 1.20 per unit
GAMMA Loss
APLHA BETA
Allocation of Joint Production cost 44,400
75,600 120,000
192,000
(118,208) 73,792
Operating Profit per unit Add: Operating Expenses: Marketing and Administrative expenses per unit
1 1
GROSS PROFIT per unit
2
Sales price per unit Less: Gross profit per unit
5 (2)
COST OF GOODS SOLD per unit
3
Less: Further processing cost per unit
(1)
COST OF GOODS SOLD per unit (at split off point)
2
Cost of Z Product = 2,000 units x Rs. 2 = Rs 4,000
ALLOCATION OF JOINT PRODUCT COST TO X and Y (by Market value method. Product
Ultimate MV / unit
Nos. of units produced
Ultimate Market Price
Processing cost
Hypothetical Market value
X
20
8,000
160,000
40,000
120,000
Y
25
10,000
250,000
70,000
180,000 300,000
Allocation of Joint Production Cost to X and Y is now Rs. 200,000 because Rs. 4,000 charged to Product Z which deduct from total cost of Rs. 204,000
Allocation %
w Rs. 200,000 duct from total
Allocation of Joint cost
40
80,000
60
120,000 200,000
Required no. 1: Market Value method Product
Units
Sales price per unit
Total Market Value
Allocation %
Buildon
6,000
2.20
13,200
36.67
Buildeze
8,000
1.25
10,000
27.78
Buildrite
10,000
1.28
12,800 36,000
35.56 100
Required no. 2: Weighted Average method Product
Units
Weight per unit
Weighted Units
Allocation %
Buildon
6,000
6
36,000
33.33
Buildeze
8,000
4
32,000
29.63
Buildrite
10,000
4
40,000 108,000
37.04 100
Appropriation of Joint Production cost 7,920 6,000 7,680 21,600
Appropriation of Joint Production cost 7,200 6,400 8,000 21,600
Required no. 1: Average unit cost method
Product Unit Produced
Allocation %
Allocation of Joint production cost
Additional Cost
Total Cost
X
6,000
50.00
30,000
9,000
39,000
Y
4,000
33.33
20,000
7,000
27,000
Z
2,000 12,000
16.67 100
10,000 60,000
5,000 21,000
15,000 81,000
Required no: 2: Market Value method
Total joint production cost Units Sales price at split off A B C D
20,000 15,000 10,000 15,000
120,000
0.25 3.00 3.50 5.00
ALLOCATION OF JOINT PRODUCTION COST (AT SPLIT OFF POINT) Joint Product
No. of units produced
A B C D
Sales price at split off
20,000 15,000 10,000 15,000
Total
Total M. Value
0.25 3.00 3.50 5.00
A
Percentage
5,000 45,000 35,000 75,000 160,000
B
Allocation of Joint cost
3.125 28.125 21.875 46.875 100
C
3,750 33,750 26,250 56,250 120,000
D
Total units
60,000
20,000
15,000
10,000
15,000
Sales (in units)
52,000
18,000
12,000
8,000
14,000
8,000
2,000
3,000
2,000
1,000
138,500
4,500
36,000
28,000
70,000
Cost 120,000 Less: ending inventory (16,125)
3,750 (375)
33,750 (6,750)
26,250 (5,250)
56,250 (3,750)
COGS
103,875
3,375
27,000
21,000
52,500
34,625
1,125
9,000
7,000
17,500
25
25
25
25
25
Ending units Sales (in value)
Gross Profit GP percentage
ALLOCATION OF JOINT PRODUCTION COST (AFTER SPLIT OFF POINT SALES VALUE)
Product
Ultimate M.V per unit
A B C D
Unit Produced
0.50 5.00 4.50 8.00
20,000 15,000 10,000 15,000
Section A
Sat
8:30 -10
Section B
Sat
10- 11:30
Ultimate M.V
10,000 75,000 45,000 120,000 250,000
Processing Cost after split off point 2,000 10,000 10,000 28,000 50,000
Hypothetical Market Value 8,000 65,000 35,000 92,000 200,000
0.19 2.25 2.63 3.75
% of Joint Cost Allocation 4.00 32.50 17.50 46.00 100
Allocation of Joint Production Cost 4,800 39,000 21,000 55,200 120,000
Total Cost
6,800 49,000 31,000 83,200 170,000
Dept no.1:
Dept no.2
Input
110,000
Receiving from dept 1
Cost
120,000
Additional cost
66,000 38,000
19,800 BETA (30% of 66,000 units)
No additional cost & Joint produc Market expenses Sales value 1.20 per unit
46,200 APLHA Transfer to Dept 4 (70% of 66,000 units) Additional cost Sale value Dept No. 3 Receiving from dept 1
23,660 Rs. 5 / unit
44,000 (40 % of input in dept 1) (4,000) (10% of good output) 40,000 Good output
Additional cost
165,000 Sales value 12 per unit
Let good output is X Input - Loss = Good output 44000 - 0.1 of x = x 44000 = x + 0.1 x 44000 = 1.1 x x = 44000 / 1.1 X = good out put = 40,000 units Req no: 1 Allocation of Joint Production Cost
Product
M.V. per unit
Aplha
Gamma
Nos. of units produced
Market Value
Processing Cost
Hypothetical M.V
5
46,200
231,000 15,660
38,000 23,660
185,000
37
12
40,000
480,000
165,000
315,000 500,000
63 100
W-1: Calculation of net realizable value method Sales revenue of Beta (19,800 units x 1.20) Less: Marketing expenses Net Realizable Value of beta
23,760 (8,100) 15,660
Required no: 2: Gross profit of Alpha Sales
Allocation %
(48,000 x 80% = 38,400 units x Rs. 5)
Less: Production Cost Joint cost allocation to Alpha Additional cost: Department no. 2 Department no. 4
102,000 38,000 23,660
61,660
Total Production Cost Less: Net Realizable value of beta
163,660 (15,900)
Net Production Cost Less: Ending inventory
147,760 (29,552) COST OF GOODS SOLD Gross Profit
W-1
W-2
Net realizable value of beta Sales value of Beta Less: Marketable value NRV
24,000 (8,100) 15,900
Cost of ending inventory Cost of ending inventory = Net production cost x % of ending inventory =147,760 x 20% 29,552
(60 % of input in dept 1)
o additional cost & Joint production cost arket expenses 8,100 ales value 1.20 per unit
GAMMA Loss
APLHA BETA
Allocation of Joint Production cost 44,400
75,600 120,000
192,000
(118,208) 73,792
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