Cost and Management Accounting · Joint Products and By Products

Apportionment of Joint Costs to Joint Products for CA Inter

Updated 4 October 2026 · Fact-checked

Joint cost is the common cost of materials, labour and overheads incurred up to the split-off point, where two or more joint products emerge together. You share it among products using a basis: physical units, average unit cost, sales value, NRV, or contribution margin. Pick the basis the question names, then compute proportions.

Understand Apportionment of Joint Costs to Joint Products

In some processes, one input produces two or more main products at the same time. Refining crude oil or milling grain are examples. You cannot say how much of the cost belongs to each product, because they come out of one process. The cost incurred until they separate is the joint cost. The point where they separate is the split-off point.

For product costing and stock valuation, you still need a cost per product. So you apportion the joint cost on some reasonable basis. The result is only an allocation, not a true cost. That is why several methods exist, and each gives a different profit for each product.

The methods fall in two groups. Cost-based or physical methods use quantity: the physical unit method and the average unit cost method. Market-based methods use the ability to bear cost: the sales value at split-off method, the NRV method, and the contribution margin method. The sales value and NRV methods give every product a uniform gross profit percentage, which is often seen as fairer. The contribution margin method does not do this, because it apportions joint fixed cost on each product's contribution.

Costs incurred after split-off are separable (further processing) costs. They belong to that one product and are never shared. You add them to that product's share of joint cost. Only joint cost is apportioned.

The question usually tells you the method. If it does not, the common default is the physical unit method, or the sales value method when selling prices differ widely. State your choice in the answer.

Key rules to remember

Physical unit method: Share of joint cost = (Units of the product ÷ Total units of all joint products) × Joint cost; Use the same unit (kg, litres) for all products. Convert if units differ.
Average unit cost method: Average cost per unit = Total joint cost ÷ Total units of all joint products; Product cost = Units × Average cost per unit; Gives the same result as the physical unit method when units are comparable. Profits per unit differ widely.
Sales value at split-off point method: Share of joint cost = (Sales value of the product at split-off ÷ Total sales value at split-off) × Joint cost; Sales value = Units produced × Selling price at split-off. Use units produced, not units sold, unless told.
Net realisable value (NRV) method: NRV = Final sales value − Further processing cost − Selling and distribution cost (if given); Share = (NRV ÷ Total NRV) × Joint cost; Use when products are processed further after split-off and there is no selling price at split-off. The NRV so found is the hypothetical NRV at split-off: final sales value less post-split-off processing and selling costs.
Contribution margin method: Step 1: Apportion joint variable cost on a suitable basis (physical units or sales value). Step 2: Contribution = Sales value − joint variable cost share − separable variable cost. Step 3: Apportion joint fixed cost in the ratio of contribution.; Joint variable cost goes on physical units or sales value, as the question states. Joint fixed cost goes on each product's contribution. Follow the question's wording.
Weighted average (weighting factor) method: Weighted units = Units × Weight; Share = (Weighted units of product ÷ Total weighted units) × Joint cost; Weights reflect size, effort or market value as given. Use when physical units are not directly comparable.

How to solve Apportionment of Joint Costs to Joint Products questions

Use this method for any joint cost apportionment question. It keeps your working clean and earns step marks.

1Read the question and mark the split-off point. List the joint cost items and any costs after split-off.
2Note the method asked for. If none is named, choose one, say why, and state it clearly.
3Compute the base for each product: units, average cost, sales value at split-off, NRV, contribution or weighted units.
4Total the base and find each product's ratio or percentage. Check that the ratios add to 100%.
5Multiply each ratio by the total joint cost to get each product's share. Check the shares add to the joint cost.
6Add separable costs after split-off to each product's share of joint cost to get total cost. Divide by units for cost per unit.
7Prepare a statement of cost, sales and profit per product, if asked. Comment on the result in one line.

Quickest way: Ratio-and-check method

When to use it: Use for MCQs and for the written parts of numericals when time is short.

MCQ: Identify the method from keywords such as 'kg', 'selling price at split-off' or 'further processing'. Then compute the ratio mentally.
Reduce the ratio by a common factor, for example 4,000 : 6,000 becomes 2 : 3. Then divide the joint cost in that ratio.
Eliminate options whose shares do not add up to the joint cost. This removes at least two options quickly.
Written: use a single table with columns for units, base, ratio, share, further cost, total cost and profit. Show totals and tie them to the joint cost.
Write the formula in one line before the table. Examiners award marks for method, basis and the final statement.

Common mistakes in Apportionment of Joint Costs to Joint Products

Apportioning separable costs along with joint cost.
Students add all costs together and split the total.
Fix: Split only costs up to the split-off point. Add each product's post-split-off cost directly to that product.
Using final selling price instead of NRV in the NRV method.
Students forget to deduct further processing and selling costs.
Fix: Always compute NRV = final sales value − further processing cost − selling cost before taking the ratio.
Using units sold instead of units produced for the base.
The question gives both production and sales figures.
Fix: Joint cost relates to production. Use units produced for the base, unless the question clearly says otherwise.
Mixing units such as kg and litres in the physical unit method.
Students take the numbers as given without checking.
Fix: Convert to a common unit first, or use the weighted average method if the question gives weights.
Ignoring by-product or scrap credit before apportioning.
The by-product line is overlooked in a long question.
Fix: Deduct the net by-product income from the joint cost unless the question says to treat it otherwise. Then apportion the balance.
Shares do not sum to the joint cost because of rounding.
Ratios are rounded to few decimals early.
Fix: Keep ratios as fractions, or adjust the last product's share so the total equals the joint cost.

Worked examples

Example 1

A process produces three joint products, A, B and C. The joint cost up to the split-off point is ₹3,60,000. Output: A 4,000 kg, B 3,000 kg, C 2,000 kg. Selling prices at split-off: A ₹50 per kg, B ₹40 per kg, C ₹30 per kg. Apportion the joint cost (a) by the physical unit method and (b) by the sales value at split-off method.

Show the solution

Total units = 4,000 + 3,000 + 2,000 = 9,000 kg.
(a) Cost per kg = ₹3,60,000 ÷ 9,000 = ₹40.
A = 4,000 × 40 = ₹1,60,000. B = 3,000 × 40 = ₹1,20,000. C = 2,000 × 40 = ₹80,000. Total = ₹3,60,000.
(b) Sales value: A = 4,000 × 50 = ₹2,00,000. B = 3,000 × 40 = ₹1,20,000. C = 2,000 × 30 = ₹60,000. Total = ₹3,80,000.
Joint cost as a proportion of sales value = 3,60,000 ÷ 3,80,000 = 18/19.
A = 2,00,000 × 18/19 = ₹1,89,473.68. B = 1,20,000 × 18/19 = ₹1,13,684.21. C = 60,000 × 18/19 = ₹56,842.11.
Check: 1,89,473.68 + 1,13,684.21 + 56,842.11 = ₹3,60,000.

Answer: (a) Physical unit method: A ₹1,60,000, B ₹1,20,000, C ₹80,000. (b) Sales value method: A ₹1,89,474, B ₹1,13,684, C ₹56,842 (rounded to the nearest rupee, and the last figure adjusted so the total is ₹3,60,000).

Example 2

Two joint products, X and Y, come out of a process at a joint cost of ₹2,40,000. Output: X 6,000 units and Y 4,000 units. Both are processed further. Further processing cost: X ₹60,000 and Y ₹40,000. Final selling price: X ₹60 per unit and Y ₹80 per unit. Apportion the joint cost by the NRV method and find the profit of each product.

Show the solution

Final sales value: X = 6,000 × 60 = ₹3,60,000. Y = 4,000 × 80 = ₹3,20,000.
NRV: X = 3,60,000 − 60,000 = ₹3,00,000. Y = 3,20,000 − 40,000 = ₹2,80,000. Total NRV = ₹5,80,000.
Joint cost to X = 2,40,000 × 3,00,000 ÷ 5,80,000 = ₹1,24,137.93. Joint cost to Y = 2,40,000 × 2,80,000 ÷ 5,80,000 = ₹1,15,862.07. Total = ₹2,40,000.
Total cost: X = 1,24,137.93 + 60,000 = ₹1,84,137.93. Y = 1,15,862.07 + 40,000 = ₹1,55,862.07.
Profit: X = 3,60,000 − 1,84,137.93 = ₹1,75,862.07. Y = 3,20,000 − 1,55,862.07 = ₹1,64,137.93.
Check total profit: 1,75,862.07 + 1,64,137.93 = ₹3,40,000. Total sales 6,80,000 − total cost 3,40,000 = ₹3,40,000.

Answer: Joint cost: X ₹1,24,138 and Y ₹1,15,862. Profit: X ₹1,75,862 and Y ₹1,64,138. Total profit is ₹3,40,000.

Exam tips

Look for the method name in the question. Many questions ask for two or three methods, so build one table and extend it for each method.
Check whether the question gives selling price at split-off or only final price. That tells you whether to use sales value or NRV.
Show the ratio and the check total in every answer. Examiners award marks for each step even if the final figure has a small error.
Read for by-product income or scrap. Deduct it from joint cost before apportioning, unless the question says otherwise.
For MCQs, test options by checking that shares add to the joint cost. You can usually eliminate two options without full calculation.

Practice questions from Joint Products and By Products

Apportionment of Joint Costs to Joint Products in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Apportionment of Joint Costs to Joint Products: frequently asked questions

Which method of apportioning joint cost is best?

No method is perfect, because joint cost cannot be traced to one product. Market-based methods such as sales value or NRV are usually seen as fairer, since they share cost according to ability to bear it. In exams, use the method the question names.

What is the difference between the physical unit method and the average unit cost method?

Both share cost in proportion to units, so they give the same result when units are comparable. The physical unit method shows the ratio of units. The average unit cost method works out one cost per unit and multiplies it by the units of each product.

When do I use the NRV method instead of the sales value at split-off method?

Use the sales value at split-off method when you have selling prices at the split-off point. Use the NRV method when products are processed further and no split-off price is available, only final prices. You then deduct post-split-off processing and selling costs from the final sales value to reach a comparable value at split-off.

Are costs after the split-off point included in joint cost?

No. Costs after split-off are separable costs and belong to a single product. You add them to that product's share of the joint cost, and you never apportion them across products.