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

Kaveri Foods incurs joint costs of ₹5,40,000 for products A and B. Output: A 3,000 units, B 2,000 units. Final selling prices are ₹120 per unit for A and ₹150 per unit for B. Further processing after split-off costs ₹20 per unit for A and ₹30 per unit for B. Using the net realisable value (NRV) at split-off method, the joint cost apportioned to A is:

NRV of A is 3,000 × (120 − 20) = ₹3,00,000 and NRV of B is 2,000 × 120 = ₹2,40,000, totalling ₹5,40,000. This equals the joint cost, so A bears ₹3,00,000. Ignoring further processing costs would give a wrong share.

  1. A₹3,24,000
  2. B₹2,88,000
  3. C₹3,00,000Correct
  4. D₹2,40,000

Explanation

NRV of A = 3,000 × (120 − 20) = ₹3,00,000. NRV of B = 2,000 × (150 − 30) = ₹2,40,000. Total = ₹5,40,000, so A's share = 3,00,000/5,40,000 × 5,40,000 = ₹3,00,000. Using sales value without deducting further costs would give A 3,60,000/6,60,000 × 5,40,000 = ₹2,94,545, which is wrong.

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