Joint cost

Joint cost is the collection of the common operation costs incurred before a point called, split-off point, where joint products are identified as individual products.[1] It can also be defined as the cost to operate joint-product processes including the disposal of waste.[2] With regard to joint costs, it is essential to allocate the joint cost for the different joint products for determining individual product costs. Several methods are used to allocate joint cost. These methods are mainly classified onto engineering and non-engineering methods. Non engineering methods are mainly based on the market share of the product; the higher market share, the higher proportion assigned to it e.g. net realizable value. In this method, the proportions are determined based on the sales value proportions. In the engineering based method, proportions are found based on physical quantities and measurements such as volume, weight, etc.

References

  1. ↑ Lanen, W. N., Anderson, S., Maher, M. W. (2008). Fundamentals of Cost Accounting, McGraw Hill, ISBN 978-0-07-352672-0
  2. ↑ Wouters, Mark; Selto, Frank H.; Hilton, Ronald W.; Maher, Michael W. (2012): Cost Management: Strategies for Business Decisions, International Edition, Berkshire (UK), p. 532.


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