# Apportioning Joint Costs — Physical & Average Unit Methods
Joint cost is the combined cost up to the split-off point. To value inventory and report profitability per product, this cost must be allocated across joint products. Six methods are commonly used:
| # | Method |
|---|---|
| I | Physical Units Method |
| II | Average Unit Cost Method |
| III | Market Value at Point of Separation |
| IV | Market Value After Further Processing |
| V | NRV at Split-Off Point |
| VI | Contribution Margin Method |
This lesson covers Methods I and II.
## Method I — Physical Units Method
Allocate joint cost in the ratio of physical output units of each product.
$$\text{Cost to Product}_i = \text{Total Joint Cost} \times \frac{\text{Units of Product}_i}{\text{Total Units}}$$
Critical condition: All outputs must be in the same unit of measurement (all in kg, or all in litres). Mixing units invalidates the method.
## Method II — Average Unit Cost Method
Compute a single average cost per unit; multiply by each product's units.
$$\text{Average Cost} = \frac{\text{Total Joint Cost}}{\text{Output}_1 + \text{Output}_2 + \ldots}$$
$$\text{Cost to Product}_i = \text{Average Cost} \times \text{Output}_i$$
Note: This produces the same per-unit cost for every product (which may be unrealistic when products differ substantially in value).