Ch 9 Summary.docx

2 Pages
79 Views
Unlock Document

Department
Accounting & Financial Management
Course
AFM 481
Professor
Grant Russell
Semester
Fall

Description
Chapter 9 Joint Product and By-Product Costing Joint Products & Costs - Joint products: one or more products/services are created when processing one product - Main product: the product with the higher sales value - By-products have lower sales value - Joint costs: costs that incurred to jointly produce the group of goods - Joint costs are common to all joint products – incurred before the split-off point (where indiv. products are identified) - Separable costs are incurred after the split-off point Allocating Joint Costs - Joint costs must be allocated to each product for reporting inventory & COGS (f/s), income tax return and other reports - Also must be allocated for gov’t regulatory reports Physical Output Method - Allocate joint costs sing the relative portion of physical output for each main product - Use only when output for all main products can be expressed using the same physical measure (meters, km, L) - Identify an appropriate allocation base (lbs), calculate relative weight of by-product and multiply by joint costs to get cost to allocate Sales Value at Split-off Point Method - Allocate joint costs based on the relative sales value of main products - Allocation rate = sales value of product / sales value of all products Net Realizable Value (NRV) Method - Allocate joint costs using the relative value of main products – after considering the additional sales value created and costs incurred - Same calculation as sales value but use NRV instead of sales value Constant Gross Margin NRV Method - Allocate joint costs so that the gross margin % for the main products are identical - First calculate the combined gross margin % - total gross margin / total sales - Less gross margin % × sales $ = product costs - Less separable costs = allocated joint costs Choosing an Appropriate Joint Cost Allocation Method - Product gross margin will vary depending on which method is used because the costs are assigned at different proportions under each method - However, the total gross margin is the same for all methods Pros and Cons of Alternative Allocation Methods - Choose allocation method to avoid giving the impression that one or more products are sold at a loss - Physical volume commonly used when all uni
More Less

Related notes for AFM 481

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit