Question

Heartland Fabrication offers several carbon, steel, and aluminum products. In a new initiative, Heartland has committed to using 90% of the residual product (byproducts and waste) as raw materials for other applications or to be sold.

To do this, the costs of byproducts must be accumulated and then allocated to each product, whether used again as raw material or sold. The accounting department is researching several ways to track these costs, which will either become raw material costs for further production or cost of goods sold (if sold and not reprocessed).

• Explain the difference between joint products and byproducts.
• If you were in charge of the cost accounting department, suggest what methods might be available to Heartland in tracking these byproduct costs.
• What qualitative issues does Heartland need to consider in reusing or selling byproducts?

Answer 1

Question	Explain the difference between joint products and byproducts.
Ans	Joint Product are those product which are produced with a same production process, with the same raw material and require further processing to become the finshed product after they get seperated
By product is the product which emerges out as a subsidiary of the main product during the course of manufacturing of a main product.No further processing is required in by product
Question	If you were in charge of the cost accounting department, suggest what methods might be available to Heartland in tracking these byproduct costs.
Ans	By product is the product which emerges out as a subsidiary of the main product during the course of manufacturing of a main product.No further processing is required in by product.The main product have a significant value.The point at which the by product and the joint product emerges from the common process is known as split off point.The cost upto the split off point is known as common cost
	Since the value of By product is not significant,we have 2 method of determining the cost of By product
1	The by Products could be determined at the time of split off point at their net realizable value
2	None of the common cost assigned to the By products.All the amount of common cost are allocated to joint product at the split off point and amount realised from sale of By product will be treated as revenue
Question	What qualitative issues does Heartland need to consider in reusing or selling byproducts?
Ans	One Major decision a company has to make is to determine the point at which to sell or further processing is when the product is no longer cost effective to continue the processing or it is cost effective to sale the by product.The point at which some products are removed from production and sold is known as by Product while others receive additional processing is known as the split-off point.Tthe relevant revenues and costs must be evaluated in order to make the best decision for the company