What is a split-off point example?
A split-off point is the point of production at which joint products appear in the production process. For example, when a company was preparing its financial statements, it realized that because it showed no profit or loss, it was unattractive to investors.
What is the split-off point in accounting?
A split-off point is the location in a production process where jointly manufactured products are henceforth manufactured separately; thus, their costs can be identified individually after the split-off point. Prior to the split-off point, production costs are allocated to jointly manufactured products.
How do you calculate market price in split off?
Market value is also a relatively straightforward method of common cost apportionment when the joint products can be sold at the split-off point. The output of each product is multiplied by their selling price at the split-off point to provide the respective weighting to be applied to the common costs.
What does split-off mean?
the act of separating or splitting away from something else. something that has split or has been split from something else.
Which product or products should be sold at the split-off point?
Which product(s) should be sold at the split-off point? Answer: A product should be sold at the split-off point if there is not any incremental profit from processing the product further. As long as the process as a whole is profitable, it is irrelevant if an individual product is not profitable.
What are joint products give two examples?
Examples. The processing of crude oil can result in the joint products naphtha, gasoline, jet fuel, kerosene, diesel, heavy fuel oil and asphalt, as well as other petrochemical derivatives. The refinery process has variable proportions depending on the distilling temperatures and cracking intensity.
What are the 3 methods that joint costs can be allocated?
Three methods of allocating joint product costs are the physical units method, the market value method, and the net realizable method. The constant gross margin percentage method is also used to allocate joint cost.
What does split off mean?
How do you calculate total sales revenue?
A simple way to find sales revenue is by multiplying the number of sales and the sales price or average service price (Revenue = Sales x Average Price of Service or Sales Price).
What is market value method?
The market approach as a valuation method is used to find the value of a business by comparing it to other similar businesses that have sold recently. The two commonly used market approach methods are the Public Company Comparables and Precedent Transactions.
How do you account for by products in cost accounting?
Credit of By-Product Net Sale Value to Process Account: In this method, the sale value of the byproducts will be credited to Process Account after deducting direct selling and distribution costs and other process costs incurred after point of separation and any special costs incurred on account of by-products.
When a product is past the split-off point but is not yet a finished product it is called?
Intermediate Product. A product that is past the split off point, but is not yet a finished product.
What is by-product and how is different from joint product give few examples of by-product and joint product?
When the production of two or more products of similar value, are made together with same input and process, is called joint product. The term by-product means a product which is incidentally produced, during the processing operation of another product. Joint products have same economic value.
Are petrol and diesel joint products?
Examples of joint products are gasoline, diesel, kerosene, lubricants, tar, paraffin and asphalt obtained from crude oil.
How do you calculate joint cost?
One of the simplest methods to apportion joint cost is the average unit cost method. Here, the average cost per unit is calculated by simply dividing the total cost of all the joint products incurred before their splitting-off, by the total of the number of units produced all together.
How does the sales value at split off method allocate joint costs?
A. The sales value at splitoff method allocates joint costs to joint products on the basis of the relative total sales value at the splitoff point of the total production of these products during the accounting period.
