11CHAPTER 13(Joint ProductsPages 597-599)2Joint Products3• Joint Costs (JC)–E.g.s•Dairy•Slaughter house•Petroleum refinery• Split-Off Point24Joint Products (JP) vs. By-Products (BP)5• Assume JCs not allocated to BPs• We will discuss BPs later6Methods of Allocation37• Methods Used to Allocate JCs• Some Based on FMV• Two Methods that use FMV–Sales Value at Split-Off –Net Realizable Value8• Sometimes FMV is Suspect–E.g.s• Can Use Another Method –Physical Units9Physical Units Method41011• Nut Pieces as JP:UnitsCost UnitPrem. 2 2/15 x $60 = $ 8 $4Nuts 3 3/15 x $60 = $12 $4Pieces 10 10/15 x $60 = $40 $415UnitsCost UnitPrem. 2 2/5 x $60 = $24 $12Nuts 3 3/5 x $60 = $36 $125• Nut Pieces as BP:12• Notice same unit cost for JPs –Not realistic & causes problems513Sales Value At Split-Off Method14• Nut Pieces as JPUnit Price FMV CostPrem. 2 $30 $60 $60/100 x$60= $36Nuts 3 $10 $30 $30/100 x$60= $18Pieces 10 $ 1 $10 $10/100 x$60= $ 615 $100• Cost per unit: –Premium $18/lb–Nut: $6/lb–Pieces: 60¢/lb15Unit Price FMV CostPrem. 2 $30 $60 $60/90 x$60= $40Nuts 3 $10 $30 $30/90 x$60= $205 $90• Nut Pieces as BP• Cost Per Unit:–Premium: $20/lb–Nuts: $6.67/lb616Net Realizable Value Method1718• Chemical B No FMV• Work backwards approximate FMV:Value of Chemical C: (50 x $2) $100 Value of Chemical D: (50 x $3) 150Total Value of Chemical C & D: $250Less: Further Costs: (10)Net Realizable Value of B: $240Unit Value of B: ($240/200) $1.20/unit719• Using NRV for Chemical B:Units Price Value CostsA 100 $3 $300 $300/540 x$300= $167B 200 $1.2 $240 $240/540 x$300= $133300 $540• Cost per unit–A: $1.67–B: 67¢20Units Price Value CostsC 50 $2 $100 $100/250 x$143= $57.20D 50 $3 $150 $150/250 x$143= $85.80100 $250• Cost Per Unit–C: $1.14 –D: $1.7221By-Products822• 1stthing to remember is that you are dealing with net sales proceeds from the sale of the BP–Sales price less further processing costs23• Two basic way to handle BPs– 1stway Net proceeds treated as Other Revenue– 2ndway Deduct net proceeds from JCs•Then do allocation of new JC 242ndway JC are $280 ($300 -
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