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ACC 410 (34)
Chapter 9

chapter 9 notes

2 Pages

Course Code
ACC 410
Maurizio Di Maio

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Chapter 9 F. Joint Product Costs and the Contribution Approach. Several end products are produced from a single input in some manufacturing processes. Such end products are known as joint products. The costs associated with making these products up to the point where they can be recognized as separate products (the split-off point) are called joint product costs. 1. The pitfalls of allocation. Joint product costs are really common costs that are incurred to simultaneously produce a variety of end products. Unfortunately, these common costs are routinely allocated to the joint products. Allocated joint product costs are often misinterpreted as costs that could be avoided by producing less of one of the joint products. However, joint product costs can only be avoided by producing less of all of the joint products simultaneously. If any of the joint products is made, then all of the joint product costs up to the split-off point will have to be incurred. 2. Sell or process further decisions. A decision often must be made about selling a joint product as is or processing it further. a. It is profitable to continue processing a joint product after the split-off point so long as the incremental revenue from such processing exceeds the incremental processing costs. b. In such decisions, the joint product costs incurred before the split-off point are not relevant. They would be relevant in a decision to shut down the joint process altogether, but they are irrelevant in any decision about what to do with the joint products once they have reached the
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