Sometimes product relationships make a transition from waste to by-product to joint product. One classic example is natural gas. It’s common to encounter natural gas when drilling and pumping oil. At one time, the natural gas “nuisance” was simply burned off at the well. As it became commercially viable, natural gas became a by-product of oil pumping. Currently, when natural gas is found in sufficient quantities, it is often classified as a co-product by oil producing companies.
I once knew a company that made the blanks for bottle caps by punching them out from a metal sheet. The skeleton sheet was treated as scrap until some enterprising employee contracted with a manufacturer that used them for making industrial furnace filters. Eventually, with a balanced customer base for bottle caps and furnace filters, there were two viable products for the company and virtually no waste (an accountant’s dream situation).
Can you think of other situations where the line between scrap and/or a by-product and/or a joint-product has (or may have) wavered?
The Source is:
Principles of Cost Accounting , 17th Edition
Edward J. Vanderbeck; Maria R. Mitchell
ISBN-10: 1-305-08740-2
ISBN-13: 978-1-305-08740-8
Sample Solution