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

Kaveri Foods processes a joint process costing ₹5,00,000 and yields 10,000 kg of main product M and a by-product B of 1,000 kg. By-product B sells at ₹30 per kg, with selling and distribution expenses of ₹5 per kg. The company credits the net realisable value of the by-product to the joint process. The cost to be apportioned to M is:

The cost apportioned to the main product is ₹4,75,000. The by-product's net realisable value, being ₹30 less ₹5 selling cost on 1,000 kg, is ₹25,000, and this is deducted from the ₹5,00,000 joint process cost.

  1. A₹4,70,000
  2. B₹4,75,000Correct
  3. C₹4,80,000
  4. D₹4,95,000

Explanation

Net realisable value of B = 1,000 x (30 - 5) = ₹25,000. Credited to the joint process, cost for M = 5,00,000 - 25,000 = ₹4,75,000. Using the gross sales value of ₹30,000 would give ₹4,70,000, ignoring the selling expenses.

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