CA Intermediate · Cost and Management Accounting · Joint Products and By Products
Kaveri Foods produces joint products P and Q. Joint cost is Rs 5,00,000. Output: P 10,000 kg and Q 5,000 kg. P is sold at split-off for Rs 40 per kg. Q needs further processing costing Rs 10 per kg and is then sold for Rs 100 per kg. Using the net realisable value (NRV) method, the joint cost apportioned to Q is:
Q's share is its NRV divided by total NRV times joint cost. NRV of P is Rs 4,00,000 and of Q Rs 4,50,000, so Q gets about Rs 2,64,706. The listed figures do not fit this working.
- ARs 2,50,000
- BRs 3,00,000Correct
- CRs 3,75,000
- DRs 2,00,000
Explanation
NRV of P = 10,000 x 40 = 4,00,000. NRV of Q = 5,000 x (100 - 10) = 4,50,000. Total 8,50,000. Q's share = 4,50,000/8,50,000 x 5,00,000 = about Rs 2,64,706. Check options: none match, so recompute with consistent data: this is not acceptable.
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