Joint Product Costing

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on August 27, 2021

Joint Products: Definition

Joint products refer to two or more products that are created together. This article offers an explanation, examples, and accounting techniques for costing such products.

Joint Products: Explanation

Joint products are produced simultaneously by a common process or series of processes, with each product possessing more than nominal value in its produced form.

This definition emphasizes the point that the manufacturing process creates products in a definite quantitative relationship. An increase in one product’s output will increase the quantity of the other products, or vice versa, but not necessarily in the same proportion.

Joint product costing constitutes the cost that arises from the common processing or manufacturing of products produced from a common raw material. The joint product cost results from the creation of two or more different products from a single cost factor.

A joint cost is incurred before the point at which separately identifiable products emerge from the same process.

Characteristics and Examples

Physical relationships that necessitate simultaneous production serve as a link between numerous products. To the point of split-off or the point where these products emerge as individual units, the cost of the products forms a homogeneous whole.

The classic example of joint products is found in the meatpacking industry, where various cuts of meat and by-products are processed from one original carcass with one lump sum cost. 

The chief characteristic of the joint product costing is that the cost of these different products results in an indivisible sum for all products, rather than in individual amounts for each product.

The total production cost of multiple products involves both the joint cost and individual product costs. 

These separable product costs are identifiable with the individual product and generally need no allocation. However, the joint production cost requires assignment to the individual.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.

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