6.2 Separable costs are costs incurred beyond the split-off point that are assignable to one or more individual products. 6.3 Exhibit 6.2 presents nine examples from four different general industries. These include Industry
Separable products at the split-off point Agriculture • Lamb • Lamb cuts, offal, hides, bones, fat • Turkey • Breasts, wings, drumsticks, poultry meal Mining
• Petroleum • Crude oil, gas, raw LPG 6.4 A product is any output that has a positive sales value (or an output that enables an organisation to avoid incurring costs. In some joint-cost settings, outputs can occur that do not have a positive sales value. The offshore processing of hydrocarbons yields water, which is recycled back into the ocean, as well as yields oil and gas. The processing of mineral ore to yield gold and silver also yields dirt as an output, which is recycled back into the ground. 6.5 The chapter lists the following six reasons for allocating joint costs 1 Stock cost and cost-of-goods-sold calculations for external financial statements and reports for income tax authorities. 2 Stock cost and cost-of-goods-sold calculations for internal financial reporting. 3 Cost reimbursement under contracts when only a portion of a business’s products or services is sold or delivered to a single customer. 4 Customer profitability analysis where individual customers purchase varying combinations of joint products or byproducts as well as other products of the company.
