Joint cost allocation

Joint cost allocation apportions the shared production costs incurred up to the split-off point among the separate products that emerge from a joint process, using bases such as physical volume or relative sales value.

ByHoang TruongUpdated June 30, 2026

FrameworkJoint product costing

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A joint process yields three products with split-off sales values of €400,000, €350,000 and €250,000 — 40%, 35% and 25% of the €1,000,000 total. Applying those proportions to the €300,000 joint cost allocates €120,000 to Product A, €105,000 to Product B and €75,000 to Product C.

Where it fits

SubjectCost AccountingAdvancedTopicJoint Products, By-Products & SpoilageAdvanced

The formula

LaTeX

\text{Allocated Joint Cost (physical units)} = \frac{\text{Units of product}}{\text{Total units of all products}} \times \text{Total joint costs}

Variables

$U ni t so f p r o d u c t$: Physical quantity of one individual joint product at the split-off point (kg / litres / units)
$T o t a l u ni t s$: Combined physical quantity of all joint products at split-off (kg / litres / units)
$T o t a l j o in t cos t s$: All shared production costs incurred up to the split-off point (€)

Physical-units method — allocates by weight, volume, or count

LaTeX

\text{Allocated Joint Cost (sales value)} = \frac{\text{Sales value of product at split-off}}{\text{Total sales value at split-off}} \times \text{Total joint costs}

Variables

$S a l es v a l u eo f p r o d u c t a t s pl i t - o f f$: Revenue one joint product would generate if sold immediately at the split-off point (€)
$T o t a l s a l es v a l u e a t s pl i t - o f f$: Combined revenue all joint products would generate at split-off (€)

Relative-sales-value method — allocates in proportion to each product's revenue if sold at split-off

Check yourself

PracticeCORE

Under the relative sales-value method of joint cost allocation, the shared costs incurred up to the split-off point are apportioned between joint products in proportion to:

Select an answer to check your understanding.