CMA Intermediate · Corporate Accounting and Auditing · Inventories (Ind AS 2)
Sundaram Industries incurred a joint cost of ₹6,00,000 producing joint products A and B, which become separately identifiable only at the end of production. Output sales values: A ₹5,00,000 and B ₹3,00,000. Allocating on relative sales value, what cost is assigned to B?
₹2,25,000 is assigned to B. Joint conversion costs are allocated on a rational, consistent basis such as relative sales value; B's sales value is 3/8 of the total ₹8,00,000, so its share of the ₹6,00,000 joint cost is ₹2,25,000.
- A₹2,25,000Correct
- B₹3,00,000
- C₹2,40,000
- D₹1,80,000
Explanation
Relative sales value basis: B's share = 3,00,000 / 8,00,000 = 37.5%. Cost to B = 6,00,000 x 37.5% = ₹2,25,000. Option ₹3,00,000 wrongly equates cost with sales value, and ₹3,00,000 is also an equal split.
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