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BBA cost Accounting Study Material to Joint Products and By Products Short Notes

BBA cost Accounting Study Material to Joint Products and By Products Short Notes : BBA Cost Accounting 1st Semester Books Most Important Notes Study Material in English Language PDF Download.

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BBA cost Accounting Study Material to Joint Products and By Products Short Notes : Page 2

BBA cost Accounting Study Material to Joint Products and By Products Short Notes
BBA cost Accounting Study Material to Joint Products and By Products Short Notes

Learning objectives 

  • Meaning Of Joint Product
  • Meaning Of Co-Product
  • Method Of Accounting For Joint Products
  • Method Of By – Products
  • Distinction Between Joint Product And By – Product
  • Distinction Between Scrap And By – Product

Bba cost Accounting Introduction to Joint Products and By Products Short Notes


In production, processing and manufacturing industries it is common that the input factors will be processed at various stages before obtaining the end production and in some processes it will result in production of two or more product where on product cannot be produce without the production of other product or products and the management will not have control over the ration in which the various final products come out of the process. The products arise out of common process can be classified into joint products, co – products, by – products, scrap and wastage’s.

Bba cost Accounting Study Material to Joint Products and By Products Short Notes of Joint Products

Joint Products 

CIMA defines joint product as “two or more products separated in processing each having a sufficiently high sale value to merit recognition as a main product” joint products represent two or more products separated in the course of same processing operations, usually requiring further processing each product being in such proportion that no single product can be designated as a major product. The process of a particular raw material may result in the output of two or more products of real economic importance and none of them can be treated as major products. A joint product is the term used when two or more products arise simultaneously in the course of processing each of which has a significant sales value in relation to each other. When two or more products are simultaneously produced from common set of inputs by a single process, which are indistinguishable from each other up-to the point of separation, are called ‘joint products’. The relative sales values would be an indication of joint products; simultaneous production is the important feature, but the ultimate products not being capable for identification until the split off point is reached. The example of process industries and their joint products are given below:

CIMA defines joint cost as “the cost of providing two or more products or services whose production could not, for physical reasons, be segregated.

The point at which joint products become separately identifiable is called the ‘split – off point’ or ‘separation point’. The production costs incurred prior to the split – off point are called ‘joint cost’ and after this point the expenses that are incurred for further processing are called ‘separable’ or ‘further processing’ costs . Joint costs are those costs which are common to the processing of joint product or by products up-to the point of separation. In other words, joint costs are allowable to two or more products produced from same raw material or the same process. Such joint costs are joint product cost.

Common costs, distinguished from joint costs, are those assigned to two or more products produced in a single department or responsibility centre. The costs which have to be allocated or apportioned to two or more departments are also termed as ‘common costs’.

Bba Cost Accounting Short Notes of  Co –products 

Co –products 

When a particular type of product is produced in different varieties, they are called ‘co –products’. For example

  1. Furniture manufacturing company manufactures tables, chairs, cots, almirahs, interior decorating furniture etc.
  2. Automobile manufacturing company manufactures heavy commercial vehicles, light commercial vehicles, buses, utility vehicle etc.

Each of the co-products may be requiring a different type of raw material and may be processed differently to meet needs of the market, but may frequently use the common facilities installed in the concern. Co – products are distinguished from joint products. The co – products can be produced in quantities and the production of one co – product will not affect the production of other co – product. But the joint products will arise from the common process and common input and can be identified only at split – off stage and linear relation exists between them as to the quantities of production.

Bba cost Accounting Study Material to Joint Products and By Products Short Notes of Accounting for Joint Products

Accounting for Joint Products 

The following are commonly used methods for allocation of total costs incurred up-to the separation point or split – off point among joint products:

Bba Cost Accounting Short Notes of Physical Units Method

Physical Units Method

A physical base like raw materials weight or volume of the products like kgs., tones, liters, gallons, bales, number of units etc. is taken as basis for apportioning the joint costs to products under this method. The process is borne by the joint products in the ratio of their output weight.


  • It is a simple and easy method for understanding and application
  • It is technically sound


  • It is equitable to allocate joint costs on the basis of physical weight without consideration of its sale value.
  • It the output cannot be expressed in physical quantities, this method cannot be applied
  • Similar allocation will be made to all joint products irrespective of its quality.
  • It is not logical to treat all products is equally important , desirable and valuable

Bba Cost Accounting Short Notes of Market Value Method

Market Value Method

In this method, joint costs will be apportioned to the products in the ration of selling price of respective individual products. The rationale underlying this approach is that product with higher sales value should be allocated with a larger proportion of joint costs than the products with lower sales value. This ability to absorb joint costs is measured either by sale value or selling price. This method is advocated based on the argument that it is a convenient method for apportionment of joint costs based on ability to absorb i.e.., if one product sells more, more costs should be allocated to it than the product with lower sale value.

Criticism is leveled against the above method based on the following reasons:

  • Selling prices of some joint products are fairly stable while others fluctuate and it makes allocation of joint costs difficult.
  • Determination of relative selling prices of joint products itself a difficult and time consuming process.

The following variants are in practice in this method of allocation of joint costs:

  1. Market Value at Separation Point: The market value of individual joint products at the point of separation i.e. at the split – off point, is ascertained and the joint costs will be apportioned in the ratio of market value ascertained as above.
  2. Marker Value at Finished Stage: in this method, the common costs and joint costs are apportioned to the joint production in the ratio of final selling price of individual products and costs incurred for further processing will be added to the respective joint products for determination of product costs.
  3. Net Realisable Value: The sale value of final product reduced by the estimated net profits, direct selling and distribution expenses and the cost of processing after the separation point will be taken as basis for apportionment of joint costs to determine the product costs.

Bba Cost Accounting Short Notes of Contribution Margin Method

Contribution Margin Method

Under this method the joint costs are divided into variable and fixed costs. The variable costs are applied joint products on the basis of units produced or other physical quantities. In case the products are processed further after split – off point, then all variable costs incurred be added to the variable costs ascertained earlier. Then total variable costs will be applied to joint products on the basis mentioned above and deduct it from respective sales values to ascertain the contribution of each joint product. The fixed costs will be apportioned in the ratio of contribution made by individual products.

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