Joint and by product costing

Joint and by product costing are specific costing methods that are used for the purpose of assigning costs to separate products in cases where two or more different products are manufactured together in the same production process – so called joint products OR main and by product. 

There are two general approaches of joint (common) costs allocation depending on the type of manufactured products:

• if the products are of the same importance (= joint products) – common costs are allocated by using a meaningful allocation base
• if the products are NOT of the same importance (= main and by product) - net realizable value (sales value) of by-product is deducted from the costs of the joint costs and the difference is used to value the main product