Pintoo Pvt. Ltd. runs a straightforward chemical process that transforms a single material into three distinct products, named Ae, Bee, and Cee.…

CA Intermediate · Cost and Management Accounting · MTP · September 2025
Pintoo Pvt. Ltd. runs a straightforward chemical process that transforms a single material into three distinct products, named Ae, Bee, and Cee. These three end products are separated simultaneously at a single split-off point. Products Ae and Bee are ready for sale immediately after the split-off, with no additional processing or costs. However, Product Cee undergoes further processing before it can be sold. There is no market price available for Cee at the split-off point. For the current year, the selling price of the products and the units sold were as follows: Product Units sold (tons) Selling price (₹) Ae 558 4,500 Bee 1,581 3,375 Cee 2,208 2,250 Cost related information for the same year is as follows: Particulars Amount (₹) Total joint manufacturing costs 56,25,000 Additional cost spent to finish product Cee 27,90,000 There were no opening or closing work-in-progress, however, the following inventories of completed units were on hand at the end of the year: Product Units (tons) Ae 540 Bee 180 Cee 75 You are required to: (i) COMPUTE the cost of inventories of Ae, Bee and Cee for Balance Sheet purpose and cost of goods sold for income statement purpose using Net realizable value (NRV) method of joint cost allocation. (ii) PREPARE Income Statement showing gross margin percentage of Ae, Bee and Cee.

Suggested Answer and Working Notes:

(i) Statement of Joint Cost allocation of Ae, Bee and Cee using net realisable value method Particulars Product Ae (₹) Bee (₹) Cee (₹) Total (₹) Sales Value of total production (Working Note 1) 49,41,000 (1,098 tons x 4,500) 59,43,375 (1,761 tons x 3,375) 51,36,750 (2,283 tons x 2,250) 1,60,21,125 Less: Additional cost 27,90,000 27,90,000 Net realisable value (at split-off point) 49,41,000 59,43,375 23,46,750 1,32,31,125 Joint cost allocated (Working Note 2) 21,00,587 25,26,730 9,97,683 56,25,000 Calculation of Cost of ending inventory and Cost of goods sold: Product Ae (₹) Bee (₹) Cee (₹) Total (₹) Allocated joint cost 21,00,587 25,26,730 9,97,683 56,25,000 Additional costs 27,90,000 27,90,000 Cost of goods available for sale (CGAS) 21,00,587 25,26,730 37,87,683 84,15,000 Less: Cost of ending inventory (Working Note 3) (10,33,069) (2,58,232) (1,24,615) (14,15,915) Cost of goods sold 10,67,518 22,68,498 36,63,068 69,99,085 (ii) Income statement showing gross margin percentage Product Ae (₹) Bee (₹) Cee (₹) Total (₹) Sales Value of goods sold (A) 25,11,000 (558 tons x 4,500) 53,35,875 (1,581 tons x 3,375) 49,68,000 (2,208 tons x 2,250) 1,28,14,875 Less: Cost of goods sold 10,67,518 22,68,498 36,63,068 69,99,085 Gross margin (₹) (B) 14,43,482 30,67,377 13,04,932 58,15,790 Gross margin (%) (B/A) x 100 57.49% 57.49% 26.27% Working notes: 1. Total production of three products for the year Product Quantity sold (tons) Ending inventory (tons) Total production Ending inventory % (1) (2) (3) (4) = (2) + (3) (5) = (3)/(4) Ae 558 540 1,098 49.18 Bee 1,581 180 1,761 10.22 Cee 2,208 75 2,283 3.29 2. Joint cost apportioned to each product: Ae = ( Total joint cost x Net realisable value of each product) Total net realisable value = ( 56,25,000 x 49,41,000) 1,32,31,125 = 21,00,587 Bee = ( 56,25,000 x 59,43,375) 1,32,31,125 = 25,26,730 Cee = ( 56,25,000 x 23,46,750) 1,32,31,125 = 9,97,683 3. Cost of ending inventory Product CGAS (₹) Ending inventory % Cost of ending inventory (₹) (1) (2) (3) (4) = (2) x (3) Ae 21,00,587 49.18 10,33,069 Bee 25,26,730 10.22 2,58,232 Cee 37,87,683 3.29 1,24,615

Topics: Joint Products and By Products

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