BY-PRODUCT definition in the Cambridge English Dictionary

Thus, a sale of a By-Product can be beneficial to the business if that is priced correctly and at optimum levels by the business. A by-product is typically the leftovers from an activity that continues to be useful to your company, but doesn’t contribute directly to its intended purpose or production process. For example, if your company makes tires it might also produce sawdust as a by-product. But if your company runs a wood shop, the sawdust may be useful for flooring or other products. Likewise, leftover scrap metal from making cars might have some resale value as it could be sold for recycling.


Hitesh Bhasin is the CEO of Marketing91 and has over a decade of experience in the marketing field. He is an accomplished author of thousands of insightful articles, including in-depth analyses of brands and companies. Holding an MBA in Marketing, Hitesh manages several offline ventures, where he applies all the concepts of Marketing that he writes about.

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All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. 11 Financial is a registered investment adviser located in Lufkin, Texas. 11 Financial may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. 11 Financial’s website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Unamortized costs are not carried forward unless they can be specifically attributed to the new by-product.

  1. To sell it in the market, some processing may be done on it, if required.
  2. CIMA define By-product as “output of some value produced incidentally in manufacturing something else (main product)”.
  3. Companies must build highly specialized facilities to store this material and hire employees who can take caution in handling, transporting, and disposing of it.
  4. Although she acknowledges the dearth of data on the subject, Mazac thinks insects warrant further consideration as a feasible alternative to more common — and carbon-intensive — meats.

How is the cost for scrap or salvage value of by-products handled?

Politicized conspiracy theories — like the suggestion that Bill Gates will take away meat and force everyone to eat insects — are insidious misinformation that Joseph Yoon fights daily. Roughly 30 percent of the world’s population considers insects a delicacy or dietary staple, a practice that goes back millennia. A study published earlier this year found that over 3,000 ethnic groups across 128 countries eat 2,205 species of Insecta, with everything from caterpillars to locusts appearing in dishes of every description. These invertebrates are a rich source of protein, fat and vitamins. The creatures are most commonly eaten by consumers in Asia, North America — predominantly Mexico, where people enjoy 450 varieties  — and Africa.

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Byproduct is a compound word made up of the prefix bi- and the root product. This is a well-used and recognized word in the English language, and knowing its proper use and spelling is essential. (3) No attempt is made to control the inventory of by-products and losses due to frauds are possible. CIMA define By-product as “output of some value produced incidentally in manufacturing something else (main product)”.

(2) All costs and expenses charged to the main products is not scientific. When the market value of by-product is very small or negligible as compared to the main products, the sale value of by-product is shown as other income or miscellaneous receipt in the Profit and Loss Account. The by-products are valued at a predetermined standard rate for each product which may be based on technical assessment. Standard cost of by-product is credited to the Process Account of the main product. This method makes it convenient to ascertain the cost of main product due to operational difficulties in computation of value of by-product. The distinction between scrap and by-product is a matter of degree determined in terms of value as well as manufacturing objective.

Examples include gases, saw dust, smoke and other unsalable residues from the manufacturing process. Waste presents no accounting problems because it has no sales value, and therefore it is not included in the valuation stock. Alternatively, if the by-product has a market value at that split-off point, the by-product account is charged with this market value. The production cost of the main product is credited for such materials, and the offsetting debit is assigned to the department that uses the by-product. In the first three cases, income from by-product sales is credited, while in the fourth case, the main product’s production cost is credited.

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After almost a decade of experience in public accounting, he created to help people learn accounting & finance, pass the CPA exam, and start their career. But he doesn’t believe insects belong on the slate of urgent solutions. Among other things, he questions the environmental impact of feeding them to livestock, and whether the creatures can be raised and harvested humanely. E.g. A printer manufacturer sells color ink refills for the printer. To maintain the performance of the printer, it is advisable that the customer uses the printing ink from the same manufacturer.

These are then sold to professional landscapers and home garden enthusiasts. The replacement cost method is commonly used in the steel industry. Although many by-products are sold in the open market, other products (e.g., blast furnace gas and coke oven gas) are mixed and used to heat open-hearth furnaces. These leftover products may when should a company use last in first out lifo not be as valuable as the main product, but they too have some economic value. Thus, these leftover products, known as by-products can be sold off as independent products in the market. The revenue generated from the sale of this product can be used to meet some expenses of the business or bring down the costing of the main product.

The main drawback in this method is any change in market value of by­product will alter the cost of main products which will show deviation from standards set or previous costs incurred. A byproduct is an incidental product that is created by a manufacturing process that creates multiple products. The other products created by the process are considered to be the primary output of the system. It may be possible to sell byproducts; alternatively, any revenues to be gained from byproducts are so minor that they are simply discarded as waste. This income is too insignificant to be accounted for under a separate head.

At Finance Strategists, we partner with financial experts to ensure the accuracy of our financial content. Marketing and administrative expenses may also be allocated to the by-product on some equitable basis. The balance of this account is shown in the income statement using one of the procedures outlined in Method 1. Method 2 recognizes the need to assign some cost to the by-product.