ECO Cotton Limited manufactures two joint products Cotton Fiber, Cotton Seed and a by-product Cotton Linters by processing a raw cotton, The joint…

Working Note: Calculation of Net Realizable value of By-Product: Particulars Selling Price after further processing (₹) 10 Less: Further Marketing Cost (₹) 1 Less: Further Processing Cost (₹) 2 Net Realisable Value (10 -3) 7 Quantity (Kgs) 300 Net Realisable Value of By-Product (300 kg@7) (₹) 2,100 Calculation of Net joint costs to be apportioned: Particulars Amount (₹) Joint Costs 1,46,100 Less: Net Realizable value of by-product 2,100 Net joint costs to be apportioned 1,44,000 (i) Statement showing apportionment of Joint Cost between Cotton fiber and Cotton Seed using sales value at split-off point Product Cotton Fibre Cotton Seeds Quantity (in Kgs) 2,800 1800 Selling Price at Split-off point (per kg) (₹) 90 60 Sales Value at Split off point (₹) 2,52,000 1,08,000 Joint Cost Apportioned (₹ 1,44,000) 1,00,800 43,200 (ii) Statement showing Profit or loss if the Joint Products are Sold Without further Processing Product Cotton Fibre Cotton Seeds Total Sales Value at Split off point (₹) 2,52,000 1,08,000 3,60,000 Less: Joint Cost Apportioned (₹ 1,44,000) 1,00,800 43,200 1,44,000 Profit 1,51,200 64,800 2,16,000 (iii) Statement of increment profit/loss to decide further processing Product Cotton Fibre Cotton Seeds Incremental Revenue 56,000 12,600 [(110-90) × 2,800] [(67-60) × 1,800] Less: Further processing cost 39,200 14,400 (9+5) x 2800 (6+2) x 1800 Incremental profit /(loss) 16,800 (1,800) Increment Profit/(loss) can be presented on unit basis also. It is advisable to further process only product Cotton Fibre and to sale product Cotton Seeds at the point of separation.