Costing Methods : Inter-Process Profit, Joint Products, By-Products and Accounting

Here are some notes on inter-process profit, joint products, by-products, and accounting in detail:

Inter-Process Profit

Inter-process profit is the profit that is earned on the sale of joint products after the split-off point. The split-off point is the point in the production process where the joint products become separate. Inter-process profit is calculated by subtracting the cost of processing the joint products after the split-off point from the revenue earned from the sale of the joint products.

Joint Products

Joint products are two or more products that are produced from the same process. Joint products are typically sold for different prices. The cost of producing joint products is allocated to the individual products based on their relative sales value.

By-Products

By-products are products that are produced as a secondary result of the production of a main product. By-products are typically sold for a lower price than the main product. The cost of producing by-products is typically not allocated to the main product.

Accounting

The accounting for inter-process profit, joint products, and by-products depends on the specific circumstances. In general, the cost of producing joint products is allocated to the individual products based on their relative sales value. The cost of producing by-products is typically not allocated to the main product.