GreenChem Organics Ltd. is a company that processes agricultural waste to extract valuable chemical compounds used in the cosmetics and…

CA Intermediate · Cost and Management Accounting · MTP · September 2025
GreenChem Organics Ltd. is a company that processes agricultural waste to extract valuable chemical compounds used in the cosmetics and pharmaceutical industries. The process yields: One main product (Active Bio-Extract - ABE)Two by-products:Bio-Wax (BWX) – used in lip balms and creamsBio-Fertiliser (BFT) – sold to organic farms For the month of April 2025, the following production data and financial estimates are provided: Total joint processing cost up to separation point:3,60,000 Particulars ABE (Main) BWX (By-Product 1) BFT (By-Product 2) Cost incurred after separation – 62,000 45,000 Quantity produced (units) 6,000 2,200 3,000 Selling price per unit 150 55 40 Estimated net profit (% of sales) – 25% 20% Estimated selling expenses (% of sales) 15% 10% 10% There is no opening or closing inventory.The company allocates joint costs to by-products based on net realizable value (NRV). PREPARE the following for the month of April 2025: (i) Statement showing allocation of joint cost to BWX and BFT (ii) Statement showing product-wise and overall profitability as well as profit per unit.

Suggested Answer and Working Notes:

(i) Statement Showing Allocation of Joint Cost Particulars BWX (Bio-Wax) (₹) BFT (Bio-Fertiliser) (₹) No. of Units Produced 2,200 3,000 Selling Price per Unit (₹) 55 40 Sales Value 1,21,000 1,20,000 Less: Estimated Profit (25% of sales for BWX, 20% for BFT) (30,250) (24,000) Cost of Sales 90,750 96,000 Less: Selling Expenses (10% of sales for both) (12,100) (12,000) Cost of Production 78,650 84,000 Less: Cost after Separation (62,000) (45,000) Joint Cost Allocated 16,650 39,000 (ii) Statement of Product-wise and Overall Profitability for April 2025 Particulars ABE (₹) BWX (₹) BFT (₹) Sales Value (A) 9,00,000 (6,000 units x 150) 1,21,000 1,20,000 Less: Joint Cost 3,04,350 (3,60,000 - 16,650 - 39,000) 16,650 39,000 Cost after Separation – 62,000 45,000 Selling Expenses (15%, 10%, 10%) 1,35,000 12,100 12,000 Total Cost (B) 4,39,350 90,750 96,000 Profit (A - B) 4,60,650 30,250 24,000 Profit per Unit 76.775 13.750 8.00 Overall Profit = 4,60,650 +30,250 +24,000 = 5,14,900

Topics: Joint Products and By Products

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic