The following information is available for Zing Ltd. for the year 2024-25: Raw Material: Closing Stock 700 units Cost price 35 per unit Replacement…

(a) As per para 10 of AS 2 ‘Valuation of Inventories', most by-products as well as scrap or waste materials are often measured at net realizable value and this value is deducted from the cost of the main product. (i) Calculation of net realizable value of by-product, BY ₹ Selling price of by-product BY (1,000 units x 12 per unit) 12,000 Less: Separate processing charges of by-product BY (2,500) Net realizable value of by-product BY 9,500 (ii) Calculation of cost of conversion for allocation between joint products FP1 and FP2 ₹ Raw material consumed 3,20,000 Direct labour 1,60,000 Direct expenses 78,000 Fixed overhead (95,000 – 15,000) 80,000 6,38,000 Less: NRV of by-product BY (See calculation 1) (9,500) Sale value of scrap (4,800) (14,300) Joint cost to be allocated between FP 1 and FP 2 6,23,700 (iii) Determination of “basis for allocation" and allocation of joint cost to FP 1 and FP 2 FP 1 FP 2 Output in units (a) 3,000 1,600 Sales price per unit (b) 160 100 Sales value (a x b) 4,80,000 1,60,000 Ratio of allocation 3 1 Joint cost of 6,23,700 allocated in the ratio of 3:1 (c) 4,67,775 1,55,925 Cost per unit [c/a] 155.93 97.45 (iv) Determination of value of closing inventory of Finished Products FP1 and FP2 FP 1 FP 2 Closing inventory in units 500 300 Cost per unit 155.93 97.45 Value of closing inventory (finished goods) 77,965 29,235 Determination of value of closing stock of raw material FP 1 FP 2 Cost price 155.93 97.45 Sales price 160 100 Since both finished goods FP 1 and FP 2 are sold above cost, raw material will be valued at cost i.e.35 per unit (ie) ₹ 24,500 (700 units x 35) (i) Total value of closing inventory (a) Finished products: FP 177,965 FP 229,235 1,07,200 (b) Raw material - 24,500 1,31,700