Unlike discrete manufacturing which is based on Item BoMs, sub assemblies etc., Process Manufacturing would require ability to configure the manufacturing process specifications. As defined in it’s Process specification, a process order may require one or more input items to Start with and upon Finish, shall output one or more items (joint products). Also, the Process specification do not specify the quantities and the Process Order needs to capture the actual input / output / scrap quantities.
Joint costs are allocated based on number of units or physical quantity such as weight, volume or length of each product relative to total production.
Cost Allocated to a Joint Product = Total Production Cost / Quantity of Total Production
This method is suitable where physical quantity of joint-products closely reflects their costs
This method allocates joint costs on the basis of estimated sales value of a given joint product relative to the sales value of total joint production.
Cost Allocated to a Joint Product = Sale Value of the Product / Sales Value of Total Production * Total Production Costs
This method is suitable when physical quantity of joint products does not reflect their value and a reliable estimate of their sale value can be easily made.
Note: This is a work in progress.
MIT