A company processes a raw material in its Department 1 to produce three products, viz. P, Q and C at the same split-off stage. During a period…

CA Intermediate · Cost and Management Accounting · RTP · January 2026
A company processes a raw material in its Department 1 to produce three products, viz. P, Q and C at the same split-off stage. During a period 1,80,000 kgs of raw materials were processed in Department 1 at a total cost of 12,88,000 and the resultant output of P, Q and C were 18,000 kgs, 10,000 kgs and 54,000 kgs respectively. P and Q were further processed in Department 2 at a cost of 1,80,000 and - 1,50,000 respectively. C was further processed in Department 3 at a cost of 1,08,000. There is no waste in further processing. The details of sales affected during the period were as under: P Q C Quantity Sold (kgs.) 17,000 5,000 44,000 Sales Value (₹) 12,24,000 2,50,000 7,92,000 There were no opening stocks. If these products were sold at split-off stage, the selling prices of P, Q and C would have been - 50,40 and 10 per kg respectively. Required: Prepare a statement showing the apportionment of joint costs to P, Q and C.Present a statement showing the cost per kg of each product indicating joint cost and further processing cost and total cost separately.Prepare a statement showing the product wise and total profit for the period.State with supporting calculations as to whether any or all the products should be further processed or not

Suggested Answer and Working Notes:

(i) Statement showing the apportionment of joint costs to P, Q and C Products P Q C Total Output (kg) 18,000 10,000 54,000 Sales value at the point of split off (₹) 9,00,000 (50x 18,000) 4,00,000 (₹ 40 × 10,000) 5,40,000 (10x 54,000) 18,40,000 Joint cost apportionment on the basis of sales value at the point of split off (₹) 6,30,000 (12,88,000 / 18,40,000 x 9,00,000) 2,80,000 (12,88,000 / 18,40,000 x 4,00,000) 3,78,000 (12,88,000 / 18,40,000 x 5,40,000) 12,88,000 (ii) Statement showing the cost per kg. of each product (indicating joint cost; further processing cost and total cost separately) Products P Q C Joint costs apportioned (₹): (I) 6,30,000 2,80,000 3,78,000 Production (kg): (II) 18,000 10,000 54,000 Joint cost per kg (₹): (I ÷ II) 35 28 7 Further processing Cost per kg. (₹) 10 (₹ 1,80,000 / 18,000kg) 15 (₹ 1,50,000 / 10,000kg) 2 (₹ 1,08,000 / 54,000kg) Total cost per kg (₹) 45 43 9 (iii) Statement showing the product wise and total profit for the period Products P Q C Total Sales value (₹) 12,24,000 2,50,000 7,92,000 Add: Closing stock value (₹) (Refer to Working note 2) 45,000 2,15,000 90,000 Value of production (₹) 12,69,000 4,65,000 8,82,000 26,16,000 Apportionment of joint cost (₹) 6,30,000 2,80,000 3,78,000 Add: Further processing cost (₹) 1,80,000 1,50,000 1,08,000 Total cost (₹) 8,10,000 4,30,000 4,86,000 17,26,000 Profit (₹) 4,59,000 35,000 3,96,000 8,90,000 Working Notes 1. Sales value (₹) Products P Q C Sales value (₹) 12,24,000 2,50,000 7,92,000 2. Valuation of closing stock: Since the selling price per kg of products P, Q and C is more than their total costs, therefore closing stock will be valued at cost. Products P Q C Total Closing stock (kgs.) 1,000 5,000 10,000 Cost per kg (₹) 45 43 9 Closing stock value (₹) 45,000 (45 x 1,000 kg) 2,15,000 (43 x 5,000 kg) 90,000 (9 x 10,000 kg) 3,50,000 (iv) Calculations for processing decision Products P Q C Selling price per kg at the point of split off (₹) 50 40 10 Selling price per kg after further processing (₹) (Refer to working Note 1) 72 50 18 Incremental selling price per kg (₹) 22 10 8 Less: Further processing cost per kg (₹) (10) (15) (2) Incremental profit (loss) per kg (₹) 12 (5) 6 Product P and C has an incremental profit per unit after further processing, hence, these two products may be further processed. However, further processing of product Q is not profitable hence, product Q shall be sold at split off point.

Topics: Joint Products and By Products

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