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CA Intermediate · Cost and Management Accounting · Joint Products and By Products

Kaveri Agro Ltd incurs joint processing costs of Rs 5,28,000 to produce 6,000 kg of Product A and 4,000 kg of Product B. After the split-off point, A is processed further at Rs 20 per kg and sold at Rs 80 per kg. B is processed further at Rs 15 per kg and sold at Rs 90 per kg. Using the net realisable value (NRV) method, the joint cost apportioned to Product A is:

Joint cost apportioned to Product A is Rs 2,88,000. Under the NRV method, A's NRV is Rs 3,60,000 and B's is Rs 3,00,000, a ratio of 6 to 5. Apportioning Rs 5,28,000 in the ratio 36:30 gives Product A Rs 2,88,000.

  1. ARs 2,88,000Correct
  2. BRs 3,16,800
  3. CRs 3,01,714
  4. DRs 2,40,000

Explanation

NRV of A = 6,000 x (80-20) = Rs 3,60,000. NRV of B = 4,000 x (90-15) = Rs 3,00,000. Total NRV is Rs 6,60,000, so A's share = 5,28,000 x 36/66 = Rs 2,88,000. Rs 3,16,800 comes from the physical units method (6/10). Rs 3,01,714 comes from the sales value method, which ignores further processing costs.

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