Page 280 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I Manpreet Kaur, Lovely Professional University

Notes Unit 14: Equivalent Production in Process Costing

CONTENTS

Objectives
Introduction
14.1 Definition and Explanation of Joint Product Cost
14.2 Costing of Joint products
14.3 Inter Process Profit
14.4 Equivalent production

14.5 Summary
14.6 Keywords
14.7 Review Questions
14.8 Further Readings

Objectives

After studying this unit, you will be able to:
z z Explain the costing of joint products;
z z Define the inter process costing;

z z Describe the equivalent production.
Introduction

According to Shukla, Grewal and Gupta, “Joint products represent two or more products
separated in the course of the same processing operations, usually requiring further processing,
and each product being in such proportion that no single product can be designated as a major
product”. By-products have been defined as “any saleable or usual value incidentally produced in
addition to the main product”. Thus, the main difference between by-products and joint product
is that in case of the former, generally no extra expense is to be incurred, whereas in the case of
the latter additional expenditure will be necessary before the products can be sold.

Joint products are produced simultaneously by a common process or series of processes, with
each product processing more than a nominal value in the form in which it is produced. The
definition emphasizes the point that the manufacturing process creates products in a definite
quantitative relationship. An increase in one product’s output will bring about an increase in the
quantity of the other products, or vice versa, but not necessarily in the same proportion.

14.1 Definition and Explanation of Joint Product Cost

Joint product cost cay be defined as that cost which arises from the common processing or
manufacturing of products produced from a common raw material. Whenever two or more
different products are created from a single cost factor, a joint product cost results. A joint cost
is incurred prior to the point at which separately identifiable products emerge from the same
process.

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