By-product

A by-product is a secondary output of minor sales value produced incidentally alongside the main products of a joint process. Its net realisable value is typically offset against joint costs rather than allocated a share of those costs.

ByHoang TruongUpdated June 30, 2026

FrameworkJoint product costing

See it move

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A sawmill incurs €100,000 of joint costs producing timber and sawdust. Because sawdust is a by-product, its €8,000 net realisable value is credited against the joint costs rather than allocated a share of them. That leaves a net joint cost pool of €92,000, which is allocated only to the main product, timber.

Where it fits

SubjectCost AccountingPeripheralTopicJoint Products, By-Products & SpoilagePeripheral

The formula

LaTeX

\text{Net Joint Cost Pool} = \text{Total Joint Costs} - \text{Net Realisable Value of By-product}

Variables

$N e t J o in tC os tP oo l$: Remaining joint costs to be allocated among the main products after removing the by-product credit (€)
$T o t a l J o in tC os t s$: All shared production costs incurred up to the split-off point (€)
$N e tR e a l i s ab l e V a l u eo f B y - p r o d u c t$: Expected sale proceeds of the by-product less any further costs to complete and sell it (€)

The by-product's NRV is credited against joint costs before allocating to main products

Check yourself

PracticeCORE

A chemical plant produces Compound A (its main product) and a small quantity of Residue B, which has a modest commercial value. Under the standard accounting treatment for by-products, the net realisable value of Residue B is:

Select an answer to check your understanding.