Example: a common input are known as "joint products." The split-off point is the point in the manufacturing process where the joint products can be recognized as separate products. The costs incurred up to the split-off point are called joint costs. Process Joint Products- two or more products that are produced from Rider's Backfield Farm produces grass fed beef for sale to high end restaurants and consumers wishing to enjoy healthy and locally produced beef. The company presently sells T-bone cut steaks. steak may be cut into two individual products: one 6-ounce A 16-ounce T-bone mignon and one 8-ounce New York strip. The remaining 2 ounces are largely bone and are discarded as waste. A T-bone can be sold for S 6.25 per pound and cost $ 4.70 per pound to produce. The cost to further process each steak into the filet and New York strip is S 0.25 per pound. The sales prices for these two products are: $ 9.20 per pound for filet mignon $ 6.00 per pound for New York strip . . Should Rider's sell the steak as T-bones or process them further into the two products? Summary: In a joint product setting, the analysis of whether to continue to process one or more products should consider only the incremental revenues and incremental costs. Joint costs incurred to bring the product to the split off point are irrelevant to the decision (no matter how they are allocated). Chapter 12, Page-8 Example: a common input are known as "joint products." The split-off point is the point in the manufacturing process where the joint products can be recognized as separate products. The costs incurred up to the split-off point are called joint costs. Process Joint Products- two or more products that are produced from Rider's Backfield Farm produces grass fed beef for sale to high end restaurants and consumers wishing to enjoy healthy and locally produced beef. The company presently sells T-bone cut steaks. steak may be cut into two individual products: one 6-ounce A 16-ounce T-bone mignon and one 8-ounce New York strip. The remaining 2 ounces are largely bone and are discarded as waste. A T-bone can be sold for S 6.25 per pound and cost $ 4.70 per pound to produce. The cost to further process each steak into the filet and New York strip is S 0.25 per pound. The sales prices for these two products are: $ 9.20 per pound for filet mignon $ 6.00 per pound for New York strip . . Should Rider's sell the steak as T-bones or process them further into the two products? Summary: In a joint product setting, the analysis of whether to continue to process one or more products should consider only the incremental revenues and incremental costs. Joint costs incurred to bring the product to the split off point are irrelevant to the decision (no matter how they are allocated). Chapter 12, Page-8
