CA Intermediate · Cost and Management Accounting · Joint Products and By Products
Kaveri Chemicals runs a process producing joint products P and Q. Joint costs are Rs 3,60,000. Output: P 4,000 kg and Q 2,000 kg. Selling prices at split-off: P Rs 60 per kg and Q Rs 120 per kg. Using the sales value at split-off method, joint cost apportioned to Q is:
Joint cost apportioned to Q is Rs 1,80,000. Sales values at split-off are equal at Rs 2,40,000 each for P and Q, so each bears half of the Rs 3,60,000 joint cost. Using physical units instead would wrongly give Rs 1,20,000.
- ARs 1,20,000
- BRs 1,80,000Correct
- CRs 2,40,000
- DRs 1,60,000
Explanation
Sales value of P = 4,000 x 60 = Rs 2,40,000; Q = 2,000 x 120 = Rs 2,40,000. Total Rs 4,80,000, so each gets 50%. Q's share = 3,60,000 x 50% = Rs 1,80,000. Rs 1,20,000 results from apportioning on physical units (2,000/6,000), which is the wrong base.
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