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

Kaveri Foods Ltd. processes raw material in a common process and obtains joint products X and Y and a by-product Z. Joint cost is ₹5,40,000. Z sells for ₹20,000, and its selling and distribution expenses are ₹2,000. The company credits the net realisable value of the by-product to the joint process. Output: X 6,000 units and Y 3,000 units. Joint cost is apportioned on physical units. What is the joint cost per unit of X?

The cost per unit is ₹58. The by-product's net realisable value of ₹18,000 is credited to the joint process, reducing the cost to ₹5,22,000, which is spread over 9,000 physical units of X and Y.

  1. A₹60.00
  2. B₹59.78
  3. C₹58.00Correct
  4. D₹56.00

Explanation

Net by-product income = 20,000 - 2,000 = ₹18,000. Joint cost to be apportioned = 5,40,000 - 18,000 = ₹5,22,000. Total units = 9,000, so cost per unit = 5,22,000/9,000 = ₹58. Using ₹5,40,000 would give ₹60 (ignoring the by-product credit), which is wrong.

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