Process costing讲义参考.ppt

Answer Answer Distinguish between by-products and joint products Joint products are “two or more products separated in processing , each having a sufficiently high saleable value to merit recognition as a main product”. A by-product , like a joint product is the result of the main production activity. However, by-products are produced in comparatively less volume. By-products are generally formed in continuous process industries. Industries producing joint products and industries producing by-products differ only in degree and not in kind. It is the relative sales value of the output that determines whether any product is a joint product or a by-product, not the manufacturing process. Some examples of by-products are : In the dairy industry, the production of butter and cheese ( joint products) is accompanied by the production of butter milk ( butter milk is the by-product). Saw dust in the timber trade is a by-product of producing wooden planks. However, the relationship between the by-product and the main product changes with changes in economic or industrial conditions or with advances in science. What was once a by-product of an industry may become a main product and the one time main output product may become a by-product. Value by-products and joint products at the point of separation Joint products arise due to the inherent nature of production. One product cannot be produced without the other being produce. The identity of these products however is established only at the “split-off” point. Until this point all the costs incurred on the products are common costs. The costs incurred after this point are easily identifiable with each separate joint product manufactured. The first method of allocation of joint costs may not have a relationship to the revenue generating power of the individual products. The relative sales value has a relationship with the products ability to generate revenue. Relative sales value ( net realizable value) is the estimated s