Apex Chemicals Ltd. processes a basic chemical raw material in Department I, which yields two joint products, A and B, at the split-off point in the…

CA Intermediate · Cost and Management Accounting · PYQS · May 2026
Apex Chemicals Ltd. processes a basic chemical raw material in Department I, which yields two joint products, A and B, at the split-off point in the ratio 60:40. The input-output ratio of Department I is 100:90. Product A can either be sold at split-off or further processed in Department II to produce A-Prime. Department II is used exclusively for Product A, and its input-output ratio is 100:80. Production & Cost Data Particulars Department I Department II Raw Material Input 1,20,000 kg @7 per kg - Conversion Costs: Other Direct Material 4,50,000 1,00,000 Direct Labour 4,00,000 1,40,000 Variable Overhead 6,00,000 2,60,000 Fixed Overhead 5,50,000 40,000 Total Conversion Cost 20,00,000 5,40,000 Other Data: Product Selling Price (₹ per kg) Selling Expense (₹) A (split – off) 45 30,000 B 45 26,000 A - Prime 75 22,000 Required: (i) Prepare a joint cost apportionment statement for Products A and B on the basis of sales value at split-off point. (ii) Advise whether Product A should be sold at split-off or processed into A-Prime, showing incremental revenue, incremental cost, and profit.

Suggested Answer and Working Notes:

Answer (a) Calculation of Total Joint Cost of Department I Particulars Amount (₹) Raw material (1,20,000 kg × ₹ 7) 8,40,000.00 Conversion Cost: Other direct material 4,50,000.00 Direct labour 4,00,000.00 Variable overhead 6,00,000.00 Fixed Overheads 5,50,000.00 Total Cost 28,40,000.00 (i) Joint Cost Apportionment Based on Sales Value at Split-off Output total (1,20,000 x 90%) = 1,08,000 units Product A (60%) = 64,800 units Product B (40%) = 43,200 units Sales Value at split off point: Product A (64,800 x 45) = 29,16,000.00 Product B (43,200 x 45) = 19,44,000.00 Total Sales value = 48,60,000.00 Joint Cost (28,40,000) Apportioned: Product A (28,40,000 × 29,16,000)/48,60,000 = 17,04,000.00 Product B (28,40,000 ×19,44,000)/48,60,000 = 11,36,000.00 (ii) If product A is processed further into A prime Particulars Amount (₹) Output (64,800 x 80%) 51,840 (A) Incremental Revenue {(₹ 75 × 51,840) - (45x 64,800)} 9,72,000.00 Increment Cost: Conversion cost in Department II 5,40,000.00 Less: Savings on Selling Expenses (₹ 30,000 -22,000) 8,000.00 (B) Total Incremental Cost 5,32,000.00 (C) Incremental profit (A-B) 4,40,000.00 Apex Chemicals Ltd. should further process Product A into A-Prime. This decision results in an incremental profit of 4,40,000.

Topics: Joint Products and By Products

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