CMA Intermediate · Corporate Accounting and Auditing · Inventories (Ind AS 2)
Mehta Chemicals produces a main product and a by-product from a joint process. Total cost of conversion plus materials up to separation is ₹9,00,000. The by-product is immaterial, with estimated selling price ₹60,000 and further selling costs ₹10,000. At what amount is the cost of the main product carried, assuming the by-product is measured at net realisable value?
The main product is carried at ₹8,50,000. An immaterial by-product is measured at net realisable value, which is ₹60,000 less ₹10,000 selling costs, i.e. ₹50,000, and this is deducted from the total joint cost of ₹9,00,000.
- A₹8,40,000
- B₹8,50,000Correct
- C₹9,00,000
- D₹9,50,000
Explanation
By-product NRV = 60,000 - 10,000 = ₹50,000. This is deducted from the joint cost: 9,00,000 - 50,000 = ₹8,50,000. Using ₹60,000 ignores the selling costs and gives ₹8,40,000.
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