Apportionment of common costs to joint products

Last updated: 10.04.2017

During the production process can be manufactured at once two or more products. If they are of similar economic importance and none of them is significantly more important than the other, they are so called joint products. But as the production or its part is common, joint costs are incurred and it is necessary to split them between the products.  

Most often, it is done by allocating them using a reasonable allocation base which may be:

  • Net realizable value or sales value – most common method but it is based on the assumption that products with the highest sales value consume the highest proportion of costs which for sure does not always need to be right. Net realizable value (sales value) can be taken from various stages:
    • at split-off point (if available)
    • after further processing – if it is not possible to ascertain the value at the split-off point.  Costs of further processing shall then be deducted.
  • Production quantity (units, weight, …) – not applicable if the units are not comparable
  • Expert survey


The treatment in cases where the products are NOT of similar economic importance and one is therefore less important than the other (main vs. by product) is as follows.

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