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Nov 18, 2016 at 02:42 AM

How to calculate bi-product cost based on the quality of bi-product output


Hi Experts,

In a chemical industry, a particular process produces bi-product. In every product batch, bi-product can have different chemical composition and hence its cost can vary (say bi-product having purity of 10% can earn 100 / Ltr and the bi-product having purity of 12% can earn 150 / Ltr). In such a situation if I take out bi-product at standard cost, then it may not be correct (as the same product is getting used to manufacture some other product and hence the costing then may not be correct). In such a case, how can I receive the bi-product at different cost depending on the quality characteristics?