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See Also: Joint Costs DefinitionIn accounting, a joint cost is a cost incurred in a joint process. Joint costs may include direct material, direct labor, and overhead costs incurred during a joint production process. A joint process is a production process in which one input yields multiple outputs. It is a process in which seeking to create one type of output product automatically also creates other types of output product. Joint Process ExamplesJoint processes are production processes in which the creation of one product also creates other products. It is a process in which one input yields multiple outputs. Joint production processes are common in the agriculture industry, the food manufacturing industry, and the chemical industry. Joint Cost AllocationAllocate joint costs to the primary output products of the joint process, not the incidental byproducts or scrap. Allocate them using a physical measure or a
monetary measure.
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owner operating at a successful $10 million in revenue, they often mention, “My CPA”… I immediately know that CEO/Entrepreneur is referring to their Tax CPA. That is because one thing that all Entrepreneurs have in common is that they must file a tax return. So, from Read More » September 24, 2021 See also:Quick Ratio AnalysisPrice to Book Value AnalysisPrice Earnings Growth Ratio AnalysisTime Interest Earned Ratio Analysis Use of Financial Ratios Financial Ratios are used to measure financial performance against standards. Analysts compare financial ratios to industry averages (benchmarking), industry standards or rules of thumbs
and against internal trends (trends analysis). The most useful comparison when Read More » CPA’s are SpecializedJune 8, 2021 The Difference in CPAs Looking back at my career I don’t know how many times I have introduced myself to someone and they ask, “Are you a CPA?” and I say yes. Then they tell me “you must be very busy with tax season” and I look at them with a bit of awe and Read More »
JOIN OUR NEXT SERIES Financial Leadership Workshop THE ART OF THE CFO® Financial Leadership Workshop Why do we allocate joint costs?Manufacturing companies must allocate joint costs to determine the inventory value of the products that result from the joint process.
What is the purpose of using a cost allocation system?A cost allocation methodology identifies what services are being provided and what these services cost. It also establishes a basis for allocating these costs to business units or cost centers based on their appropriate share of such cost.
What is the main purpose of accounting of joint product and byJoint costing or by-product costing are used when a business has a production process from which final products are split off during a later stage of production. The point at which the business can determine the final product is called the split-off point.
Why joint costs need to be apportioned to each joint product produced by the company?The joint costs need to be apportioned between the joint products at the split-off point to obtain the cost of each of the products in order to value closing inventory and cost of sales.
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