Recognition of Net Revenue Method–By Product Costing

Recognition of Net Revenue Method–By Product Costing:

This method recognizes the need for assigning some cost to the by-product. It does not attempt, however, to allocate any main product cost to the buy product. Any expenses involved in further processing or marketing the by-product are recorded in separate accounts. All figures are shown on the income statement, following one of the procedures described at recognition of gross revenue method page.

Journal entries in this method would involve charges to by-product revenue for the additional work required and perhaps for factory overhead. The marketing and administrative expenses might also be allocated to the by product on some predetermine basis. Some firms carry an account called by-product to which all additional expenses are debited and all income is credited. The balance of this account would be presented in the income statement, following one of the procedures out lined at recognition of gross revenue method page. However, accumulated manufacturing costs applicable to by product inventory should be reported on the balance sheet.

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.

Recognition of Net Revenue Method–By Product Costing:

This method recognizes the need for assigning some cost to the by-product. It does not attempt, however, to allocate any main product cost to the buy product. Any expenses involved in further processing or marketing the by-product are recorded in separate accounts. All figures are shown on the income statement, following one of the procedures described at recognition of gross revenue method page.

Journal entries in this method would involve charges to by-product revenue for the additional work required and perhaps for factory overhead. The marketing and administrative expenses might also be allocated to the by product on some predetermine basis. Some firms carry an account called by-product to which all additional expenses are debited and all income is credited. The balance of this account would be presented in the income statement, following one of the procedures out lined at recognition of gross revenue method page. However, accumulated manufacturing costs applicable to by product inventory should be reported on the balance sheet.

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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