Policy Formation for National Industries: The Use of Non-Linear Programming Allocation of Joint Costs

This paper is written with the Icelandic fishing industry in mind, namely the freezing plants. The subject at first is how to allocate joint-cost to finished products. A joint-cost is a cost which incurred up to the split-off-point (S.O.P.), which is the point in the manufacturing process beyond which the individual products are clearly identifiable. The motivation for allocating joint-cost to the individual products in this business like others is the demands of financial and tax reporting to trace all product related costs to finished goods. It is also necessary because the prices are both derived and/or determined from the cost of the goods.