Bipolar value-driven joint product costing

There exists a joint-cost allocation problem in the public sector, particularly highlighted by the cost-based national pricing of blood products in England, supposedly derived using volume-driven activity-based costing (ABC): an approach criticised by the implementation criteria propounded for ABC within the academic literature. In contrast, we believe that the contributions of quality-associated operations-based drivers, described within ABC, together with the net realisable value method, usually recommended as the optimal joint-cost allocation method, provide the beginnings of a solution. This paper sets out a methodological development from this platform that links allocation decisions with the issue of value. The bipolar nature of the model is based upon the combination of two types of allocation. One allocates joint costs according to the altered value of source material when competing non-joint alternative products exist. The other allocates joint costs according to product outcome values ascertained separately for the physical specification elements that comprise each of the range of joint products. The overall emphases are on academic context, model generalisation, the facilitation of cost-effective choices between joint products and non-joint alternatives, and possible future trends in the application of the method.