By-Products and Main Products:
Learning Objectives:
- Define and explain By-Products.
Definition and Explanation of By Products:
The term "by product" is generally used to
denote one or more products of relatively small total value that are
produced simultaneously with a product of greater total value. The product
with the greater value, commonly called the "main product", is usually
produced in greater quantities than the by products. Ordinarily, the
manufacturer has only limited control over the quantity of the by product
that comes into existence. However, the introduction of more advanced
engineering methods, such as in the petroleum industry, has permitted
greater control over the quantity of residual products. In fact, one
company, which formerly paid a trucker to haul away and dump certain waste
materials, discovered that the waste was valuable as fertilizer, and this by
product is now an additional source of income for the entire industry.
Nature of By-Products:
The accounting treatment of by-products
necessitates a reasonably complete knowledge of the technological factors
underlying their manufacture, since the origins of by products may vary. By-products arising from the cleansing of the main product, such as gas and tar
from coke manufacture, generally have a residual value. In some cases, the
by product is left over scrap or waste, such as sawdust in lumber mills. In
other cases, the by product may not be the result of any manufacturing
process but may arise from preparing
raw materials before they are used in
the manufacture of the main product. The separation of cotton seed from
cotton, cores and seeds from apples, and shells from coca beans are examples
of this type of product.
By product can be classified into the
following two groups
according to their marketable condition at the
split-off point:
- Those sold in their original form
without need of further processing.
- Those which require further processing
in order to be saleable.
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