Joint Products and Joint Product Cost:

Learning Objectives:

1. Define and explain joint product and joint product cost

2. Definition and Explanation of Joint Products:

   Joint products are produced simultaneously by a common process or series of processes, with each product processing more than a nominal value in the form in which  it is produced. The definition emphasizes the point that the manufacturing process creates products in a definite quantitative relationship. An increase in one product's output will bring about an increase in the quantity of the other products, or vice versa, but not necessarily in the same proportion.
   

   Definition and explanation of Joint Product Cost:

   A joint product cost cay be defined as that cost which arises from the common processing or manufacturing of products produced from a common raw material. Whenever two or more different products are created from a single cost factor, a joint product cost results. A joint cost is incurred prior to the point at which separately identifiable products emerge from the same process.
   

   Example:

   For example, the production of coke, for which coal is the original raw material. In addition to coke as its major product, the process produces sulfate of ammonia, light oil, crude tar and gas. The greater quantity of gas is not sold but is used to fire the coke ovens and the boilers in the power plant. The coke ovens are the split-off point for cost assignments. The cost of each product consists of a pro rata share of the joint cost plus any separable or subsequent costs incurred in order to put the products into saleable condition.
   
   COKE AND ITS ASSOCIATED PRODUCTS

   COAL (ORIGINAL RAW MATERIAL)	→	COKE OVEN (SPLIT-OFF POINT)	→	COKE (MAJOR PRODUCT)	Plus Separable cost →	COKE
   			→	SULFATE OF AMMONIA	Plus Separable cost →	SULFATE OF AMMONIA
   			→	LIGHT OIL	Plus Separable cost →	BENZOL
   			→	CRUDE TAR	Plus Separable cost →	TAR
   			→	COKE OVEN GAS	Plus Separable cost →	GAS