Cost Allocation
Joint Products and Byproducts
Joint Products in Joint Processes
•Joint costs are costs which are incurred up to split-
off point
•Split-off point is the juncture in the process when
separate identifiable products emerge
•Separable costs are costs incurred beyond the split–
off point and are assignable to separate products
Joint
Costs
Product A Product A
Separable
Costs A
Product B Product B
Separable
Costs B
Split-off
Point
Joint Products, Byproducts
•Joint products have a relatively high sales value and
are not separately identifiable as individual products
until the split-off point
•Main product is the one with the highest sales value
resulting from a process yielding two or more products
•Byproducts have a low sales value relative to sales
value of the main or joint products (s)
Main Products
Joint Products Byproducts
High Low
Sales Value
Why Allocate Joint Costs?
Allocate joint costs to products for:
•inventory valuation
•Income determination
Approaches
•Joint costs cannot be traced to individual products,
they must be allocated. The methods available for this
allocation can be classified in two conceptual
groupings
