What is the primary purpose of by-product costing in a business?

The primary purpose of by-product costing is to assess the split-off point for determining final products. In manufacturing processes where multiple products are produced simultaneously, such as main products and by-products, the split-off point is the stage in the production process at which the joint products become distinguishable from each other.

By effectively determining the split-off point, businesses can allocate costs appropriately between the main products and any by-products. This allocation is crucial for accurately assessing the profitability of each product and for making informed pricing and production decisions. Understanding the financial implications of by-products allows companies to manage resources efficiently and contribute to overall profitability.

The other options, while related to cost accounting and business performance metrics, do not specifically address the core objective of by-product costing. For instance, while calculating total inventory costs is important, it does not focus solely on the unique considerations that by-products introduce into the cost structure. Similarly, measuring total sales revenue and evaluating market share pertain to broader business strategies and financial assessments rather than the specific purpose of by-product costing.