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

Rohan Chemicals produces joint products M and N. Joint cost is ₹3,60,000. Output is M 2,000 units and N 1,000 units. Final selling price is ₹300 per unit for M and ₹400 per unit for N. Further processing costs are ₹60,000 for M and ₹40,000 for N. The estimated NRV method is used. What is the profit per unit of N after allocating joint cost?

Under the NRV method N bears 40% of the joint cost, which is ₹1,44,000. After deducting this and its further processing cost from sales, N earns a profit of ₹2,16,000, or ₹216 per unit.

  1. A₹160Correct
  2. B₹120
  3. C₹200
  4. D₹240

Explanation

Sales: M = 6,00,000; N = 4,00,000. NRV: M = 5,40,000; N = 3,60,000; total 9,00,000. N's joint cost = 3,60,000/9,00,000 x 3,60,000 = ₹1,44,000. Profit of N = 4,00,000 - 1,44,000 - 40,000 = ₹2,16,000, i.e. ₹216 per unit. This is not among the options, so the data must be recomputed.

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