Sumários

5 Março 2024, 16:00 • James M. Kohlmeyer, III

In-class exercises:

E23, E26, E28

4 Março 2024, 15:00 • James M. Kohlmeyer, III

I. Joint-cost basics

A. Terms

1. Joint costs (JC) - costs of production process that yield multiple products simultaneously (costs incurred up to split-off pt)

* JC is irrelevant for decision-making (sunk cost)

JC is relevant for accounting purposes in financial reporting

2. Split-off point: point in manufacturing process in which two or more products

Become separately identifiable (e.g. coal: coke and natural gas)

3. Separable costs - manufacturing , marketing, distribution costs incurred BEYOND split-off point

Exhibit 1 - examples of joint cost situations

4. Main product - one product with high total sales value as compared with total sales value

5. Joint product - two or more products from same input

II. Approaches to Allocating joint costs

A. Approach 1: Market-based data (i.e. revenues)

1. Sales value @ split-off pt.

2. Net realizable value (NRV)

3. Constant GM % method

B. Approach 2: physical measures (e.g. weight, qty, volume)

* May be misleading allocation because some items weigh more than others

III. Approach 1

A. Sales value @ split-off pt

1. Allocates joint costs to joint products on basis of relative total sales value at

Split-off pt Exhibit 3

2. NRV

a. products processed further beyond split-off pt

b. increase value above SP @ split-off pt

c. allocated joint costs to joint products on basis of NRV (Final SP - separable costs) Exhibit 6

B. Physical measures method

1. Allocates joint costs to jt products produced on basis of a comparable physical measure (relative weight, qty, volume) @ split-off pt

Exhibit 4

IV. Sell or process further

A. Definition

1. Decision rule:

Incremental revenue from processing further > incremental cost from processing further, then process further beyond split-off point

Incremental revenue from processing further < incremental cost from processing further, then do not process further beyond split-off point

In-class exercises: E21, E23, E25

Management Accounting