Quantitative or Physical Unit Method–Allocating Joint Product Cost


Quantitative or Physical Unit Method–Allocating Joint Product Cost:

 

Learning Objectives:

  1. 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 articles from “by products and joint products” chapter

  1. Difficulties in costing by products and joint products
  2. Joint Products and Joint Product Costs
  3. Characteristics of Joint Products and Cost
  4. By Products
  5. Recognition of Gross Revenue
  6. Recognition of Net Revenue
  7. Replacement cost method
  8. Market value method or reversal cost method
  9. The market or sales value method, based on the relative market values of the individual products.
  10. The quantitative or physical unit method, based on some physical measurement unit such as weight, linear measure, or volume.
  11. The average unit cost method.
  12. The weighted average method, based on a predetermined standard or index of production.

Quantitative or Physical Unit Method–Allocating Joint Product Cost:

Learning Objectives:

  1. 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 articles from “by products and joint products” chapter

  1. Difficulties in costing by products and joint products
  2. Joint Products and Joint Product Costs
  3. Characteristics of Joint Products and Cost
  4. By Products
  5. Recognition of Gross Revenue
  6. Recognition of Net Revenue
  7. Replacement cost method
  8. Market value method or reversal cost method
  9. The market or sales value method, based on the relative market values of the individual products.
  10. The quantitative or physical unit method, based on some physical measurement unit such as weight, linear measure, or volume.
  11. The average unit cost method.
  12. The weighted average method, based on a predetermined standard or index of production.

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