CA Final · Financial Reporting · Ind AS 2 Inventories
Arohan Foods Ltd manufactures two joint products, X and Y, from a common process. Joint conversion cost for the month is ₹9,00,000. Output is 6,000 kg of X and 4,000 kg of Y. Both are saleable at the split-off point at ₹100 per kg for X and ₹150 per kg for Y, with no further costs. The company allocates joint costs on the relative sales value at split-off basis. What is the cost per kg of product Y that is included in closing inventory?
Y receives a 50% share of joint cost, which is ₹4,50,000. Divided over 4,000 kg this is ₹112.50 per kg, so none of the given figures is supportable.
- A₹90
- B₹135Correct
- C₹225
- D₹150
Explanation
Sales value of X = 6,000 x 100 = ₹6,00,000. Sales value of Y = 4,000 x 150 = ₹6,00,000. Total ₹12,00,000, so each product bears 50%, which is ₹4,50,000. Cost per kg of Y = 4,50,000 / 4,000 = ₹112.50. Hence the answer must be recalculated.
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