Cost and Management Accounting · Process & Operation Costing

Joint Products and By-Products in Process Costing for CA Inter

Updated 4 October 2026 · Fact-checked

Joint products come from one process, are all main products and carry a share of joint cost. By-products are minor outputs from the same process. Apportion joint cost to joint products using physical units, sales value or NRV at split-off, and credit by-product income to the process or to profit.

Understand Joint Products and By-Products in Process Costing

A joint process is one where a single input and common operations give two or more products that cannot be separated before a point called the split-off point. Costs up to that point are joint costs. Costs after it are separable (further processing) costs and belong to the specific product.

Joint products are outputs of similar importance, each with a significant sales value. Example: petrol, diesel and kerosene from crude oil. By-products are outputs of minor value compared with the main products. Example: molasses from sugar. A product's status depends on its relative value, not on its name.

Joint products must absorb joint cost, so you need a fair basis to share it. Common bases are physical units (weight or volume), sales value at split-off, and net realisable value (NRV). Physical units ignore what each product earns. Value-based methods follow the ability to bear cost, so they are usually preferred.

By-products do not get a share of joint cost in the usual approach. Their income, net of any separate cost, is treated as a reduction of the joint cost of the main products, or shown as other income. The treatment you choose must be stated clearly in the answer.

The idea behind all methods is the same. Total joint cost must be fully assigned and nothing should be left over. Check that the shares add up to the joint cost.

Key rules to remember

Physical units method: Share of joint cost = (Units of product ÷ Total units of all joint products) × Joint cost; Use one common unit. Gives the same cost per unit to every product.
Sales value at split-off method: Share of joint cost = (Sales value of product at split-off ÷ Total sales value at split-off) × Joint cost; Use only when the product is saleable at split-off.
Net realisable value (NRV) method: NRV = Final sales value − Further processing cost − Selling and distribution cost (if given); Share of joint cost = (NRV of product ÷ Total NRV) × Joint cost.
Net joint cost after by-product: Joint cost to apportion = Total joint cost − Net by-product income; Net by-product income = By-product sales − its separate processing and selling costs.
Average (constant gross margin) idea: Margin % = (Total final sales − Joint cost to apportion − Total further cost) ÷ Total final sales, where Joint cost to apportion = Total joint cost − Net by-product income. Then, for each product: Joint cost = Product's final sales − (Margin % × Product's final sales) − Product's further cost; This method needs the final sales value of every joint product. Every product is given the same margin % on its own final sales. Joint cost to apportion is the total joint cost after deducting net by-product income. Each product's joint cost is what remains of its final sales after the common margin and its own further cost. The shares add up to the joint cost to apportion.

How to solve Joint Products and By-Products in Process Costing questions

Follow the same order in every question. It protects step marks and avoids missing items.

1Identify the split-off point and list the joint cost up to it. Add the process cost of all earlier stages if given.
2Classify each output as joint product, by-product or scrap from the wording and values.
3Deduct net by-product income from joint cost if the question says so (or as per the stated policy).
4Choose the basis the question asks for: physical units, sales value at split-off, or NRV. If none is stated, use NRV or sales value and say why.
5Compute the base for each product (units, sales value or NRV) and total it.
6Apportion joint cost in the ratio of the base. Check that the shares sum to the joint cost to apportion.
7Add separable cost to each product to get total cost, then compute cost per unit and profit if asked.
8Write the final answer with a short comment, such as which product earns more or whether further processing is worthwhile.

Quickest way: Ratio table in one go

When to use it: Use this in all numerical questions, especially when time is short or the MCQ asks for the share of a single product.

For MCQs: find only the ratio of the product asked. Share = its base ÷ total base × joint cost. No need to compute other products.
Write the bases in a row and reduce to the simplest ratio, e.g. 4,000 : 6,000 : 10,000 becomes 2 : 3 : 5.
Do the by-product deduction first. Many MCQ traps depend on this.
For written answers draw a table with columns: Product, Base, Joint cost share, Separable cost, Total cost, Sales, Profit. Fill it row by row.
Keep totals at the bottom and tick them against the joint cost. This earns presentation and step marks.

Common mistakes in Joint Products and By-Products in Process Costing

Apportioning the total joint cost without deducting by-product income.
Students forget the by-product or treat it as a joint product.
Fix: Read the output list first. Subtract net by-product income, then apportion the balance.
Using final sales value instead of NRV when further processing costs are given.
The sales figure looks like the obvious base.
Fix: Deduct further processing (and selling cost if stated) from final sales before finding the ratio.
Adding separable cost into the joint cost pool.
All costs seem to belong to the process.
Fix: Separable cost belongs only to its product. Add it after apportionment.
Mixing units, such as kg and litres, in the physical units method.
Output quantities are given in different units.
Fix: Convert to one common unit before computing the ratio, or state that the method cannot be applied.
Ignoring normal loss or abnormal loss when finding output units.
The joint process data includes loss, which is overlooked.
Fix: Work out good output first. Use actual output units for apportionment and treat abnormal loss separately.
Leaving out the check that shares sum to joint cost.
Rounding errors go unnoticed under time pressure.
Fix: Add the shares at the end of the table and correct rounding on the largest item.

Worked examples

Example 1

A process produces products A, B and C jointly. Joint cost is ₹3,60,000. Output: A 4,000 kg, B 6,000 kg, C 2,000 kg. Selling prices at split-off: A ₹30 per kg, B ₹20 per kg, C ₹40 per kg. Apportion the joint cost by (i) physical units and (ii) sales value at split-off.

Show the solution

Physical units: total = 4,000 + 6,000 + 2,000 = 12,000 kg. Cost per kg = 3,60,000 ÷ 12,000 = ₹30.
A = 4,000 × 30 = ₹1,20,000. B = 6,000 × 30 = ₹1,80,000. C = 2,000 × 30 = ₹60,000. Total = ₹3,60,000.
Sales value: A = 4,000 × 30 = ₹1,20,000. B = 6,000 × 20 = ₹1,20,000. C = 2,000 × 40 = ₹80,000. Total = ₹3,20,000.
Ratio = 1,20,000 : 1,20,000 : 80,000 = 3 : 3 : 2. Total parts = 8. Value per part = 3,60,000 ÷ 8 = ₹45,000.
A = 3 × 45,000 = ₹1,35,000. B = ₹1,35,000. C = 2 × 45,000 = ₹90,000. Total = ₹3,60,000.

Answer: Physical units: A ₹1,20,000; B ₹1,80,000; C ₹60,000. Sales value: A ₹1,35,000; B ₹1,35,000; C ₹90,000.

Example 2

A process gives joint products X and Y and a by-product Z. Joint cost is ₹2,40,000. Z is sold for ₹10,000 and needs ₹2,000 of selling cost. Output: X 3,000 units, Y 2,000 units. After split-off, X needs further processing of ₹30,000 and sells at ₹100 per unit. Y needs ₹20,000 and sells at ₹120 per unit. Apportion the joint cost by the NRV method and find the profit of each product.

Show the solution

Net by-product income = 10,000 − 2,000 = ₹8,000. Joint cost to apportion = 2,40,000 − 8,000 = ₹2,32,000.
Sales: X = 3,000 × 100 = ₹3,00,000. Y = 2,000 × 120 = ₹2,40,000.
NRV: X = 3,00,000 − 30,000 = ₹2,70,000. Y = 2,40,000 − 20,000 = ₹2,20,000. Total NRV = ₹4,90,000.
Joint cost share: X = 2,70,000 ÷ 4,90,000 × 2,32,000 = ₹1,27,837 (rounded). Y = 2,32,000 − 1,27,837 = ₹1,04,163.
Total cost: X = 1,27,837 + 30,000 = ₹1,57,837. Y = 1,04,163 + 20,000 = ₹1,24,163.
Profit: X = 3,00,000 − 1,57,837 = ₹1,42,163. Y = 2,40,000 − 1,24,163 = ₹1,15,837. Total profit of X and Y = ₹2,58,000, which equals total sales 5,40,000 − (2,32,000 + 50,000), and also total NRV 4,90,000 − joint cost to apportion 2,32,000.
This profit excludes the by-product income of ₹8,000. That income was already deducted from the joint cost in the first step, so do not add it again to the profit of X and Y.

Answer: Joint cost to X ₹1,27,837 and to Y ₹1,04,163 (rounded). Profit: X ₹1,42,163 and Y ₹1,15,837 (total ₹2,58,000, excluding the by-product income of ₹8,000 already netted off the joint cost).

Exam tips

Read the output list and underline words like minor, by-product or scrap before you start. This decides the treatment.
If further processing cost is given, the examiner almost always wants NRV. Do not use final sales value directly.
State the by-product policy in one line, e.g. net income credited to the process. It earns marks even if the arithmetic slips.
Prepare a clean table with totals. Verify that shares add up to joint cost and profits tie to total sales less total cost.
In MCQs, compute only the asked product's share, and watch for by-product deduction and unit conversion traps.

Practice questions from Process & Operation Costing

Joint Products and By-Products in Process Costing in other exams

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

Joint Products and By-Products in Process Costing: frequently asked questions

What is the difference between joint products and by-products?

Joint products are main outputs of similar importance, each with a significant value, and they share the joint cost. By-products are minor outputs of low value that arise along with the main products. Their net income is usually credited to the process or to profit.

Which method of joint cost apportionment is best?

The NRV method is usually best when products are processed further, as it follows each product's ability to bear cost. The physical units method is simple but ignores value. In an exam, use the method the question names, and otherwise justify your choice.

How do you treat a by-product in process costing?

Find net by-product income by deducting its separate processing and selling costs from its sales. Then credit this to the process account, which reduces the joint cost of the main products. Alternatively, show it as other income if the question says so.

Is separable cost part of joint cost?

No. Joint cost is incurred up to the split-off point. Separable cost is incurred after it, for a single product, and is added to that product only after apportioning the joint cost.