Cost allocation acc/561 april 23, 2012 cost allocation the purpose of cost allocation is to identify and correctly allocate costs associated with a job, product, or service. Joint cost allocation methods joint cost is the manufacturing cost incurred on a joint production process which takes common inputs but simultaneously produces multiple products called joint-products eg processing of crude oil simultaneously yields gasoline, diesel, jet fuel, lubricants and other products. The management of an audit client must be able to demonstrate, to their auditor's satisfaction, that the three criteria are met with regard to a joint activity all three criteria must be met, otherwise all joint costs default to fundraising.
Joint costs definition in accounting, 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. These theories demonstrate the differences in cost allocation and they help small businesses accurately forecast costs and profits on the surface, a joint cost looks similar to a common cost but.
A joint cost is a kind of common cost that occurs after a raw product, such as a sunflower crop, undergoes two separate production processes for example, the cost of fertilizing and harvesting. When cost accounting, you want to select a method to plan and budget for joint costs choosing a method helps you know where you stand during joint production you can assess if your actual joint costs are on track with your budget. Cost per unit, winter pine = cost allocation ÷ units produced cost per unit, winter pine = $80,000 ÷ 10,000 cost per unit, winter pine = $8 in the table, the cost per unit is the same for both products that’s because the joint cost allocation isn’t related to cost because it uses the physical measure method.
Joint costs may be analogized to costs charged to an indirect cost pool, in which those indirect costs cannot be readily identifiable and charged to a specific program/project, as described in asc paragraph 958-730-45-29. C) the joint production cost per gallon of cream and liquid skim are equal because joint costs are allocated based on the number of gallons d) the joint production cost per gallon of cream is higher than joint production cost per gallon of liquid skim because of cream's higher production volume.
Joint costs are commonly allocated to the individual joint products (using the relative sales method, physical unit method, or net realizeable value method) for purposes of computing cost of goods sold. The joint cost allocation for winter pine is $100,645 (4839 percent, or 04839 x $208,000) to check your work, add the two joint cost allocations and verify that they sum up to $208,000 here’s the cost per unit for winter pine.
By-product costing and joint product costing july 22, 2018 / steven bragg a joint cost is a cost that benefits more than one product, while a by-product is a product that is a minor result of a production process and which has minor sales.