- Industries experience a profound problem in allocation of costs for joint products.
- Cost allocation is critical to ascertain profits generation for the company.
- Also, applied for balancing of the production and revenue generation.
- The costs calculation and allocation among the main products and joint products, also, can include by-products experience profound difficulties (Deevski, p.64).
- The confusion on the costs i.e., joint and total costs on the inseparable and separable capacities of the respective costs allocations and calculations.
- This involves the context of allocating costs on the basis of appropriate parameters.
- As a result, the complexities of shared costs can be eliminated and achieve an effective approach.
- Thus, provide informative approach to differentiating costs allocation and calculations to different products in the company.
- In itself the joint costs comprise of the cost incurred in the production process which is utilized to produce a variety of products simultaneously.
- This applies the same raw materials but produces different products impacting on the respective product costing.
- The joint costs impact on the costs per unit of the specific product.
- The article asserts that the joint costs cease at the instance where split-off point occurs.
- This entails the instance where each product becomes completely identifiable.
- The costing at this point is characterize by the demand and quality of the respective products (p.65).
- For example, in a flour industry – the production of flour consumed by humans and for animal feeds attracts separate costs following the complete identifiableness of the productive separately.
- Thus, induce the separable costs.
- The factors that influence the joint costs for joint products was effectively outlined in the article. This was illuminating and a key point to note.
- The insurance-settlement and damage claims incurred on the jointly produced products.
- The price regulation of one or more product or service in the joint-production.
- The cost of reimbursement of the companies affected by a few but not all of the joint products.
- Inventorial costs and internal reporting costs for respective products in the joint production (p.65).
- Inventorial costs and cost of the goods sold affect the joint costs.
- The quantity of the separable products affects the joint costs.
- This impacts on the by-products leading to the cost allocation depending on the quantity and quality.
- The by-products experience a separable cost with which the additional costs incurred determine the cost of the product (p.68).
- The cost allocation of the by-products must surpass the joint costs to ascertain profits generation for the manufacturer.
Homework B: How Crayon is Made (Royce, p.20).
Figure 1: Making of Crayon (Source: Author).
Figure 2: Summary of Crayon Making (Source: How Products Are Made)
Deevski, Stoyan. “Cost Allocation Мethods for Joint Products and By-products.” Economic Alternatives 1 (2016).
How Products Are Made. “Crayon.” Advameg, Inc., 2020, http://www.madehow.com/Volume-2/Crayon.html. Accessed 26 April 26, 2020.
Royce, Christine Anne. “Colorful Creations.” Science and Children 57.3 (2019): 20-27.
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Cost Allocation Methods Essay | Leading Homework Helpers . (2022, October 21). Essay Writing . Retrieved February 04, 2023, from https://www.essay-writing.com/samples/cost-allocation-methods-essay/
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