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Joint costs are the costs incurred during a joint production process in which one process can produce more than one product. For example in the oil refinery industry, crude oil is refined into kerosene, fuel, engine oil and so on. So the crude oil is a direct material joint cost in this case. Joint costs also could be direct labour or manufacturing overhead.
Joint cost must be allocated among the resulted products using methods like the physical measurement where we allocate the joint costs based on measures like production units, and we divide the total production cost by that total units to arrive at the cost per unit.
The other method can be used is the sales value where joint costs are allocated based on the relative sales value of each product.
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In process costing,Joint cost are costs incurred prior to the point of separation of joint products.Joint products are two or more products which are out from the same processing operation, but which are indistinguishable from each other up to their point of separation. Joint products are not separately identifiable until a certain stage is reached in the processing operations.
The joint costs needs to be allocated ( apportioned) in some manner to each of the joint products.
Various methods that might be used to establish a basis for apportioning or allocating joint or common costs to each product are;
* Physical measurement- Joint costs are apportioned to the joint products on the basis of the proportion that the output of each product bears to weight or volume to the total output.
* Relative sales value apportionment method, sales at the split -off point- the cost allocated according to the product,s ability to produce income.
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. It can also be defined as the cost to operate joint-product processes including the disposal of waste.
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
A joint cost is an expenditure that benefits more than one product, and for which it is not possible to separate the contribution to each product. The accountant needs to determine a consistent method for allocating joint costs to products.
Joint costs are likely to occur to some extent at different points in any manufacturing process.
Mohammad hamid has given a good answer above
Thank You Mr Ahmed for your invitation ... I will agree with the answers that really covered your question .. Nothing to add !
I agree with Mohammad Iqbal Abubaker
Great answers by the colleagues, I don't think I have anything more to add.
Full Agree with expert answers
thanks for the invitation, above answers by Mr. Hamid and Mr. Frank are comprehensive.
