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

Sundaram Chemicals processes a raw material in one process and gets two joint products, X and Y. Joint cost is Rs 3,60,000. Output: X 4,000 kg, Y 2,000 kg. Selling price at split-off: X Rs 90 per kg, Y Rs 120 per kg. Using the sales value at split-off method, the joint cost apportioned to Y is:

Rs 1,44,000. Total sales value at split-off is Rs 6,00,000 (X Rs 3,60,000 plus Y Rs 2,40,000). Y's share is 40 percent, so 40 percent of Rs 3,60,000 joint cost is Rs 1,44,000. The physical units method would wrongly give Rs 1,20,000.

  1. ARs 1,20,000
  2. BRs 1,44,000Correct
  3. CRs 1,80,000
  4. DRs 2,40,000

Explanation

Sales value of X = 4,000 x 90 = 3,60,000; Y = 2,000 x 120 = 2,40,000; total 6,00,000. Y's share = 2,40,000/6,00,000 x 3,60,000 = 1,44,000. Rs 1,20,000 results from the physical unit method (1/3 of the cost), which ignores selling prices.

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