A company manufactures one main product (MN) and two by-products AB and PQ. For the month of January 2024, following details are available: Total…

CA Intermediate · Cost and Management Accounting · MTP · September 2024
A company manufactures one main product (MN) and two by-products AB and PQ. For the month of January 2024, following details are available: Total Cost upto separation Point - 2,12,400 MN AB PQ Cost after separation - 35,000 24,000 No. of units produced 4,000 1,800 3,000 Selling price per unit 100 40 30 Estimated net profit as percentage to sales value - 20% 30% Estimated selling expenses as percentage to sales value 30% 15% 15% There are no beginning or closing inventories. PREPARE statement showing: Allocation of joint cost; andProduct-wise and overall profitability of the company for January 2024.

Suggested Answer and Working Notes:

Statement showing allocation of Joint Cost Particulars AB PQ No. of units Produced 1,800 3,000 Selling Price Per unit (₹) 40 30 Sales Value (₹) 72,000 90,000 Less: Estimated Profit (AB -20% & PQ - 30%) (14,400) (27,000) Cost of Sales 57,600 63,000 Less: Estimated Selling Expenses (AB-15% & PQ-15%) (10,800) (13,500) Cost of Production 46,800 49,500 Less: Cost after separation (35,000) (24,000) Joint Cost allocated 11,800 25,500 Statement of Profitability Particulars MN (₹) AB (₹) PQ (₹) Sales Value (A) 4,00,000 (4,000x 100) 72,000 90,000 Less:- Joint Cost 1,75,100 (2,12,400 -11,800 - 25,500) 11,800 25,500 Cost after separation - 35,000 24,000 Selling Expenses (MN- 30%, AB-15% & PQ-15%) 1,20,000 10,800 13,500 (B) 2,95,100 57,600 63,000 Profit (A –B) 1,04,900 14,400 27,000 Overall Profit = 1,04,900 + 14,400 + 27,000 = 1,46,300

Topics: Joint Products and By Products

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