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  3. Hello Sir , I just have one issue , if you please mention the questions also on ur lectures , it will be helpful , because on your lecture your only showing the answers , Kindly mention the questions also … so we could understand more clearly , Because I dont have F2 Book. Im studying from BPP notes.

    • The joint cost allocation is not negative!!

      It is simply that if we allocate the joint costs on physical units basis that the cost might be more than the selling price.

      Please do watch the lecture again 🙂

  7. Goodday John Moffat,

    I still cannot solve the following joint product question after watching your video. What if there are opening and closing WIP in the joint process, like the question below? How should I apportion joint cost to the joint products in this situation. Grateful if you can help solve the question below as I read many reference book but still cannot find a solution to it.

    XYZ plc, a paint manufacturer, operates a process costing system. The following details related to process 2 for the month of October:

    Opening work in progress
    5000 litres fully complete as to transfers from process 1 and 40% complete as to labour and overhead, valued at £60000

    Transfer from process 1
    65000 litres valued at cost of £578500

    Direct labour
    £101400

    Variable overhead
    £80000

    Fixed overhead
    £40000

    Normal loss
    5% of volume transferred from process 1,scrap value £2.00 per litre

    Actual output
    30000 litres of paint X (a joint product)
    25000 litres of paint Y (a joint product)
    7000 litres of by-product Z

    Closing work in progress
    6000 litres fully complete as to transfers from process 1 and 60% complete as to labour and overhead.

    The final selling price of products X, Y and Z are:
    Paint X £15.00 per litre
    Paint Y £18.00 per litre
    Product Z £4.00 per litre

    There are no further processing costs associated with either paint X or the by-product, but paint Y requires further processing at a cost of £1.50 per litre.

    All three products incur packaging costs of £0.50 per litre before they can be sold.

    Required:(a)Prepare the process 2 account for the month of October, apportioning the common costs between the joint products, based upon their values at the point of separation.

    (b)Prepare the abnormal loss/gain account, showing clearly the amount to be transferred to the profit and loss account.

  9. Dear Sir,
    This costing method can be differ, like if the Joint Products valuation can be determined separately…even than the cost per unit will be calculated on equal part..or its purely management decision.

    • Your question confused me a little bit.

      If we could measure the costs for each product separately, then it would not be ‘joint products’. Joint products is where we cannot identify which bit of the costs relate to which product.
      In this case it is up to management to decide how they wish to split the costs between the products – there is no rule.
      For the exam, you just need the two methods that I go through in the lecture.

  10. Hi sir
    Could you explain the 20% on the closing inventory in the answer for this question. I do not understand how the 20% came about and it was not mentioned in the question

    The question states:
    Two products (W and X) are created from a joint process. Both products can be sols immediately after split-off. There are no opening or work in progress. The following information is available for last period:

    Total joint production cost $776 160
    Product W
    Production Units 12000
    Sales 10 000
    Selling price per unit $10

    Product X
    Prod. units 10 000
    Sales 8 000
    Selling price per unit $12

    Using the sales value method of apportioning joint production costs, what was the value of the closing inventory of product X for last period

    The answer states
    12 000 * 10 = 120 000
    10 000 * 12 = 120 000
    X= 776 160/2 = 388080
    20% of X is closing 388080 * 20% = 77616

  12. Goodday Johnmoffat. I would appreciate u help with this Question

    A Co. Operates a Proces that produces two Joints Products-P & Q. Last month Joints Cost of $35,000 were incurred
    and the Organisation apportions these costs to Joints Products using the sales Value Method.

    Data relation to last month were are follows

    Product P -Production 12000kg; Sales 10000kg; selling Price per kg $5.00

    Product Q -Production 8000kg, Sales 9000kg; selling price per kg $10.00

    How much of the joint cost were apportioned to Product P last month

    • My Answer as per below :
      Joint Cost were apportioned to the Product P is $12,500.00
      based on the question request, using the “Sales Value Method “the working as per below :
      Product P = 10,000 kg X$5.00 = $ 50,000.00
      Product Q = 9,000 kg X $10.00 = $ 90,000.00
      Total $140,000.00

      so Joint cost for the Product P = 50000/140000 X $35,000.00 = $12,500.00
      Please correct me

      • Sir, may I know why sales value method uses production units instead of units sold?

        And for net realizable value method, will we use production units instead of sold units as well?
        Thank you sir

      • Because it is the production costs that are being apportioned. Just imagine that they didn’t sell anything at all in this period (they were all in inventory and sold in the next period) – they would still have cost money to produce 🙂
        Same with the NRV approach.

  13. lots lots of thanx for the nice lecture & diagram explanation but i have some concept not clear

    of joint product &by-product in bbp we have 2 Question it mention b-product sales revenue is credited to the process account here in this question we deduct the the by-product amount from total joint cost

    Another question it mentioned the by -product is credited to the sales account there we r not deducting the by-product amount from total joint product amount plz explain me this thanx

    • @admirableprinces, There is no ‘law’ about how to deal with a by-product. Usually we subtract the value of the by-product from the total join costs (which is the same as crediting the process account). However, if the question says to treat the revenue as sales then you do what you are told, and in this case we do not reduce the join cost.

      Commercial value is the same as sales value.

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