None

Joint Cost Allocation

A.   Characteristics--a common manufacturing process simultaneously produces two
    or more products from a common input
    1.   Joint Costs--joint costs are the costs of the common manufacturing
        process
    2.   Joint Products--joint products are the products produced from a common
        input and a common manufacturing process
        a.   By-products--by-products are joint products that are relatively
            minor in quantity and/or value
    3.   Split-off Point--the split-off point is the stage of the common
        manufacturing process where the joint products are separated

B.   Joint Cost Allocation--joint costs need to be allocated to the joint
    products for various reasons (such as inventory valuation for financial
    accounting purposes, measuring profitability of joint products, pricing
    decisions, cost reimbursement, etc.)
    1.   Physical Quantities Method--joint costs are allocated to the joint
        products based on their relative physical measure (such as volume,
        weight, etc.)
        a.   Illustration--a corporation incurred joint costs of $2,400 in
            manufacturing Product A and Product B to the split-off point;
            Product A weighed 700 pounds and had a sales value at the split-off
            point of $1,800; Product B weighed 300 pounds and had a sales value
            at the split-off point of $1,200
                Cost Allocation:
                    Product A = 700 / (700 + 300) x 2,400 = 1,680
                    Product B = 300 / 1,000 x 2,400       =   720
                                                            2,400

                Income Statement:
                                        Product A   Product B     Total _
                    Sales                 1,800       1,200       3,000
                    Cost of Goods Sold     1,680         720       2,400
                    Gross Margin             120         480         600...