Joint products definition
/What are Joint Products?
Joint products are multiple products generated by a single production process at the same time. These products incur undifferentiated joint costs until a split-off point, after which each product incurs separate processing. Prior to the split-off point, costs can only be allocated to the joint products.
A product is only considered a joint product when each of the items being produced has roughly equal economic importance. If (as is more common) they have very different market values, then the more valuable one is classified as the main product, while the other is classified as a by-product. If there is no market value associated with a secondary product, then it is treated as scrap.
Examples of Joint Products
Here are several examples of joint products:
Crude oil refining (which produces gasoline, diesel, kerosene, and other products)
Meat processing (which yields cuts of meat, hides, bones, etc.)
Dairy processing (where milk can be processed into cream, butter, cheese, and whey)
Each of these industries faces the challenge of managing joint costs and balancing the production and profitability of multiple valuable outputs from a single process.
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FAQs
How Do Joint Products Differ From By-Products?
Joint products are two or more outputs from a common process that each have significant economic value and are intentionally produced. By-products, in contrast, are incidental outputs of minor value that result from the same process but are not the main focus of production. In short, joint products share equal importance, while by-products are secondary and less valuable.
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By-Product Costing and Joint Product Costing