CA Intermediate · Cost and Management Accounting · Joint Products and By Products
Ganga Mills produces main product M and a by-product B. Total production cost is ₹4,50,000. By-product output is 2,000 units, selling at ₹20 per unit with selling and distribution expenses of ₹4 per unit. Assuming the net realisable value of the by-product is credited to the main product's cost, the net cost of the main product is:
The by-product's net realisable value is 2,000 units times (₹20 minus ₹4), which is ₹32,000. Credited against the total production cost of ₹4,50,000, it leaves the main product's net cost at ₹4,18,000.
- A₹4,18,000Correct
- B₹4,10,000
- C₹4,42,000
- D₹4,50,000
Explanation
By-product NRV = 2,000 x (20-4) = ₹32,000. Net cost of main product = 4,50,000 - 32,000 = ₹4,18,000. Deducting the full sales of ₹40,000 would give ₹4,10,000, ignoring the selling expenses.
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