What is a Split-Off Point?

A split-off point is the location in a production process where jointly manufactured products are henceforth manufactured separately; thus, their costs can be identified individually after the split-off point. Prior to the split-off point, production costs are classified as joint costs, and so are allocated to jointly manufactured products. Joint costs cannot be directly associated with any single final product.

Example of a Split-Off Point

In a petroleum refinery, crude oil is processed through fractional distillation. The split-off point occurs when the crude oil is separated into its components, such as the following:

Gasoline
Diesel
Kerosene
Heavy fuel oils
Petrochemical feedstocks (e.g., naphtha)

At this stage, the various products have been separated, and their costs up to this point (joint costs) need to be allocated for accounting purposes. After the split-off point, the individual products might undergo further processing (e.g., reforming or cracking for gasoline production).