Chapter 17 Vocabulary: Cost Allocation - Joint Products and Byproducts

Joint Costs

Costs of a production process that yields multiple products simultaneously

Splitoff Point

The juncture in a joint-production process when two or more products become separably identifiable

Separable Costs

All costs (manufacturing, marketing, distribution, and so on) incurred beyond the splitoff point that are assignable to each of the specific products identified at the splitoff point

Product

Any output that has a positive total sales value (or an output that enables an organization to avoid incurring costs)

Main Product

Product from a join production process that has a high total sales value compared with the total sales values of all other products of a joint production process

Joint Products

Two or more products that have high total sales value compared with the total sales values of other products yielded by a joint production process

Byproducts

Products from a joint production process that have low total sales values compared with the total sales value of the main product or of joint products

Sales Value at Splitoff Method

Method that 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

Physical-Measure Method

Method that allocated joint costs to joint products on the basis of the relative weight, volume, or other physical measure at the splitoff point of total production of these products during the accounting period

Net Realizable Value (NRV) Method

Method that allocates joint costs to joint products on the basis of final sales value minus separable costs of total production of the joint products during the accounting period

Constant Gross-Margin Percentage NRV Method

Method that allocates joint costs to joint products produced during the accounting period in such a way that the overall gross-margin percentage is identical for the individual products