Quantitative or Physical Unit Method--Allocating Joint Product Cost

Quantitative or Physical Unit Method--Allocating Joint Product Cost:

Learning Objectives:

Explain quantitative or physical unit method of joint cost allocation.

Quantitative or physical unit method attempts to distribute the total joint cost on the basis of some unit of measurement, such as pounds, gallons, tons, or board feet. Of course, the unit products must be measurable by the basic measurement unit. If this isn't possible, the joint units must be converted to a denominator common to all units produced, For example, in the manufacture of coke, products such as coke, coal tar, benzol, sulfate of ammonia, and gas are measured in different units. The yield of these recovered units is measured on the basis of the quantity of product extracted per ton of coal.

Example:

The example shows the use of weight as a quantitative unit method of joint cost allocation:

Products	Yield in Pounds of Recovered Product Per Ton Coal	Distribution of Waste to Recovered Products	Revised weight of Recovered Products	Materials Cost of Each Product Per Ton of Coal
Coke	1320.00lbs	69.474*	1389.474	$13.895**
Coal tar	120.00	6.316	126.316	1.265
Benzol	21.90	1.153	23.053	0.230
Sulfate of Ammonia	26.00	1.368	27.368	0.275
Gas	412.10	21.689	433.789	4.335
Waste (water)	100.00
	-------------	--------------	--------------	--------------
Total	2000.00	100.00	2000.000	$20.000
	=======	========	========	=======
[1,320 ÷ (2,000 – 100)] = 69.0474 *(1,389.474 / 2,000 ) × $20 = $13.895

You may also be interested in other relevant articles:



Our Message
We love our visitors and want to work for them.

Our Request
Knowledge is free for all. Please tell others about this site. Share this site at yahoo, Facebook, Google and other social sits and forums. In this way you will encourage accountingformanagement.com to continue writing high quality accounting articles for you. Thank you for your support.


Managerial Accounting Articles

■	Business and Quality Improvement Programs
■	Cost Terms, Concepts and Classification
■	Job Order Costing system
■	Process Costing System
■	Process Costing System - Addition of Materials and Beginning Inventory
■	Controlling and Costing Materials
■	Materials and Inventory Cost Control
■	By Products and Joint Products Costing
■	Cost-Volume-Profit-Relationship
■	Variable Costing System
■	Activity Based Costing System
■	Budgeting and Planning
■	Standard Costing and Variance Analysis
■	Gross Profit Analysis
■	Linear Programming Technique
■	Segment Reporting and Transfer Pricing
■	Capital Budgeting Decisions
■	Service Department Costing
■	Preparing Cash Flow statement
■	Financial statement Analysis
■	Pricing Products and Services
■	Managerial Accounting Terms and Definitions
■	Managerial / Cost Accounting Formulas

Financial Accounting Articles

■	Bookkeeping and Bookkeeping Terms
■	Accounting Principles and Accounting Equation
■	Journal
■	Ledger
■	Accounting For Bills of Exchange
■	Subdivision of Journal
■	Final Accounts
■	Capital and Revenue Items
■	Single Entry System/Accounting From Incomplete Records
■	Accounting For Non-Trading Concerns
■	Accounting for Consignment / Consignment Accounts
■	Accounting for Joint Ventures
■	Accounting for Depreciation

Articles By International Authors

■	Accounting Articles


Advertisements