JOINT PRODUCT COST & THE CONTRIBUTION APPROACH

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Maricellie Gonzalez, Miariani Verde, Anthony Osorio

JOINT PRODUCT COST & THE CONTRIBUTION APPROACH

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Joint products: Two or more products that are produced from a common input Split-off point: is the point in the manufacturing process at which the joint products can be recognized as separate products Joint cost: the term joint cost is used to describe the cost incurred up to the split-off point

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THE PITFALL OF ALLOCATION

Joint cost are often allocated to end products on basis of the relative sales value of each product or on some other basis Although allocation is needed for some purpose such as balance sheet inventory valuation allocation of this kind are very dangerous for decision making.

Due Diligence Pitfalls | Investment Strategy Consulting

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GETTING IT ALL WRONG

Joint product costs up to the split-off points constitute the bulk of the production costs. Joint product cost are allocated to the six product line on the basis of the relative sale value of each line at the split-off point.