Joint Products & by Products: Solutions To Assignment Problems
Joint Products & by Products: Solutions To Assignment Problems
Joint Products & by Products: Solutions To Assignment Problems
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11. JOINT PRODUCTS & BY PRODUCTS
SOLUTIONS TO ASSIGNMENT PROBLEMS
Problem No. 1
Note: Under the Contribution Margin Method, Variable Costs are apportioned using physical quantities
(since average unit cost or points are not given in the question). Fixed Costs are apportioned on the
ratio of Contribution, i.e. Sales Value Less Variable Costs.
Problem No. 2
Particulars P Q Total
Production / Sale Quantity 8,000 units 6,000 units
Sales Values 8,000 x Rs. 1,10,000 6,000 x Rs. 8.75 = Rs. 52,500 Rs. 1,62,500
Less: Profit at 25/125 of Sale Price Rs. 22,000 Rs. 10,500 Rs. 32,500
Total Cost = Sales Less Profit Rs. 88,000 Rs. 42,000 Rs. 1,30,000
Less: Further Processing Costs 8,000 x 5 = Rs. 40,000 6,000 x 4 = Rs. 24,000 Rs. 64,000
Estimated NRV at spilt – off Rs. 48,000 Rs. 18,000 Rs. 66,000
Joints Costs apportioned in NRV RS. 64,000 Rs. 24,000 Rs. 88,000
ratio
So, Joint Cost Per unit Rs. 64,000 Rs. 24,000
= Rs.8.00 = Rs.4.00
8,000 6,000
Problem No. 3
Particulars A B X Total
1. Production Quantity at split off 18,000 kgs 10,000 kgs 54,000 kgs
2. Selling Price per kg (at split off) Rs. 50 Rs. 40 Rs. 10
3. Sales Value at split off (1 x 2) Rs. 9,00,000 Rs. 4,00,000 Rs. 5,40,000 Rs. 18,40,000
4. Joint Cost apportioned in 9:4:5.4 Rs. 6,30,000 Rs. 2,80,000 Rs. 3,78,000 Rs. 12,88,000
5. Joint Cost per kg (4 ÷ 1) Rs. 35 Rs. 28 Rs. 7
6. Further Processing Costs (given) Rs. 1,80,000 Rs. 1,50,000 Rs. 1,08,000
7. Further Proc. Cost per kg (6 ÷1) Rs. 10 Rs. 15 Rs. 2
Particulars M N O P Total
a. Final Sales Value 120.00 40.00 20.00 48.00 228.00
b. Sales Value at split off 20.00 12.00 20.00 28.00 80.00
c. Additional Benefit in further processing 100.00 28.00 - 20.00 148.00
d. Additional Processing Costs 80.00 32.00 - 36.00 148.00
e. Additional Net Benefit = c – d 20.00 (4.00) - (16.00) Nil
f. Decision (based on e) Process Sell at split NA Sell at split
further off off
Observation: The Company’s profits are maximized if M is processed further into Super M. All other
products should be sold at the split off point. Additional Profits of this decision will be Rs. 20 Lakshs.
Problem No. 5
Note: Total Joint Cost to be apportioned = Rs. 12,50,000 + Rs. 7,50,000 = Rs. 20,00,000
Note: Only Further Processing Costs and the Opportunity Cost of lost contribution margin on the EstyI
diverted to Anarol purification must be considered. Joint costs are irrelevant for this decision.
Particulars
Sales Value after further processing = 2,000 gallons of anaesthetic x Rs.650 Rs.13,00,000
Less: Sales Value at split off (2,000 Anarol x Rs.350) + (1,500 EstyI x Rs.240) Rs.10,60,000
Additional Sale Revenue due to further processing Rs.2,40,000
IPCC_33e_Costing_Joint & By Products_Assignment Solutions_____________57
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Less: Additional Processing Costs Rs.2,25,000
Net Benefit in further processing Rs.15,000
Conclusion: The Company may further process the Anarol into Anaesthetic.
Problem No. 6
1. Input and Output Quantities
Particulars Qttty
Input Quantity RM Input = 1,50,000 kg
Less: Normal Loss 5% = 7,500 kg
Balance Output Quantity 1,42,500 kg
rd rd
Break up of Output Quantity Product P 1/3 = 47,500 kg, and Product Q 2/3 = 95,000 kg
2. Computation of Joint Costs and apportionment thereof (based on Sales Value at split – off)
Particulars Qttty
Basic Raw Material Cost (1,50,000 kg x Rs. 12) 18,00,000
Direct Material 90,000
Direct Wages 1,20,000
Variable Overheads 1,00,000
Fixed Overheads 1,00,000
Total Joint Costs 22,10,000
Product P Q
Sale Value at Split Off Point (47,500 kg x Rs. 12 & 95,000 kg x Rs.20) Rs.5,70,000 Rs.19,00,000
Joint Costs apportioned in ratio of Sales Value at split-off (57:190) Rs.5,10,000 Rs.17,00,000
Note:
1. Cost of Product S = Joint Cost P + Cost of Processing P into S = 5,10,000 + 1,85,000 = Rs.
6,95,000.
2. Alternatively, further processing decision can also be derived as under –
Additional Revenue from making P into S (Rs.15 – Rs.12) x 47,500 kg = Rs. 1,42,500
Less: Additional Processing Costs = Rs. 1,85,000
Loss in further processing = Rs. 42,500
Problem No. 7
Particulars A B C Total
Nature Main Product By-Product By-Product
Sales Value (given) 6,000 4,000 2,500 12,500
IPCC_33e_Costing_Joint & By Products_Assignment Solutions_____________58
No.1 for CA/CWA & MEC/CEC MASTER MINDS
Less: Profit Margin (based on % given) 1,800 1,000 375 3,175
Cost of Sales 4,200 3,000 2,125 9,325
Less: S & D Overheads [See Notes) 192 128 80 (bal.fig.) 400
Cost of Production 4,008 2,872 2,045 8,925
Less: Further Processing Costs (given) 450 325 150 925
Joint Costs (bal.gig) 3,558 2,547 1,895 (given) 8,000
Note:
• In the total column, since Joint Costs are given, S & D Overheads constitutes the balancing figure.
Rs. 400
• Next, the percentage of Total S & D OH to Total Sales is computed as = 3.2% of Sales
Rs.12,500
• Therefore, product – wise S & D Overhead is calculated at 3.2% of Sales Value, for each product.
• Thereafter, Costs of Production are derived and NRV of By-Products are determined.
• Balance Joint Costs are identified with the Main Product (i.e. 8,000 – 2,547 – 1,895 = 3,558)
Problem No. 8
1. Input and Output Quantities
Particulars Department A Department B
Input Quantity RM Input = 8,00,000 kg Product P = 4,76,000 kg
Less: Normal Loss 15% = 1,20,000 kg 10% = 47,600
Balance Output Quantity 6,80,000 kg 4,28,400 kg
Break up of Output Quantity Product P 70% = 4,76,000 kg Product AR = 4,28,400 kg
Product Q 30% = 2,04,000 kg
Particulars P Q R
a. Output Quantity (WN 1) 4,76,000 kg 2,04,000 kg 6,80,000 kg
b. Joint Costs apportioned in Physical Quantities Rs.5,53,000 Rs.2,37,00,000 Rs.7,90,00,000
Method, i.e. in ratio of (a) 476 : 204
c. Sale Value at Split Off point Rs.85 per kg Rs.290 per kg
Note: As per analysis in WN 3, the optimal decision is to process Product P into Product AR. Hence,
the corresponding Sale Value of Product AR has been considered for Joint Cost Apportionment.
However, if this decision is ignored for Joint Cost Apportionment, the NRV of Product P will be [Sales
Value (4,76,000 kg X Rs.85) less SOH Rs.24,60,000] = Rs. 3,80,000.
Problem No. 9
1. Yield Analysis for Input = 5,000 kgs
Particulars Main Product By Product Normal Loss Total
% of Yield 80% 15% 5% 100%
Input Quantity of 5,000 kgs apportioned 4,000 kgs 750 kgs 250 kgs 5,000 kgs
in above ratio
Problem No. 10
Particulars Department A Department B
1. Description of Method Credit By-Product Revenue to Credit By-Product Revenue to
Joint Process A/c P&L A/c as “Other Income”
2. Total Cost of Process (for X, Y and Z) Rs. 1,46,375 Rs. 1,46,375
(given)
3. Sales Revenue of By-Products (Credit)
a. By-Product Y (350 kg at Rs.2.00)
b. By-Product Z (270 kg at Rs. 2.50) Rs.700 Nil
THE END
IPCC_33e_Costing_Joint & By Products_Assignment Solutions_____________60