Distinction Between By-Products and Joint Products
From the definitions it appears that :
1) Joint products are of equal importance while by products are of small economic value, and
2) Joint products are simultaneously one produced unlike the by-products which are incidentally
produced in additon to the main products. But cases are not uncommon when the main products of one industry become the by-products of another. In such a case two following factorsmay be taken into consideration inmaking distinction between by-products and joint products.
1) Manufacturing objective : If the objective of an industry is to produce, say, product A,other products B and C, produced incidentally, will be treated as by-products because the plant objective is to produce only one product, i.e., product A. On the other hand, if the objective of an other industry is to produce products B and C, and if product A emerges incidentally, then products B and C will be treated as joint products while product A will be treated as by-products in as much as the plant objective, in this case, to produce products B and C only. Again if the objective, of a
third company is to produce products A, B and C simultaneously, then all the three products will be termed as joint products or main products.
2) Value : If the value of one type of product is considerably low as compared to that of other types which are simultaneously produced, then the first mentioned product is liable to be classified as by-product. On the other hand, if the value of a product, which is incidentally produced, is of considerable importance, as compared to that of amain product, products which are incidentally produced may be classified as joint products.
3) Managerial policy : In case two or more products are produced simultaneously and some of larger value and others of smaller value, managerial policy may indicate whether the smaller value product is treate as by product or joint product depending on its importance. Sometimes, realisable value of smaller value product determines the profitability of entire product-mix. Product of this type may be considered as joint product.
4) Categorisation of By – products based on further processing : Some of the by – products sold as they are without further processing. For instance, molasses, bagasse, or rice husk may be sold as they are. Cetain other lay products may need further processing. Management may consider it profitable to further process by – products and sell these as a refined or divergent product. For instance, molasses may be further processed into industrial alcohal, bagasse and husk may be further processed into card board etc.