Joint & by Product

Joint and By-Products
1. From the following information, find out the cost of joint products X, Y and Z under
(i)
Physical Unit Method
(ii)
Average Cost Method
Pre-separation point cost - Rs. 30,000

Other product information are:
Product
Production ( Units )
Raw Material Used ( Units )
1,000
4,000
400
8,000
600
8,000
2,000
20,000
Sanjeev Subedi Q. N 1
2. In the course of manufacture of the main product P, by products A and B also emerge.
The joint expenses of manufacture amount to Rs. 119,550. All the three products are
processed further after separation and sold as per details given below:
Main Product
By Products
90,000
60,000
40,000
Cost Incurred after Separation Rs.
6,000
5,000
4,000
Profit as percentage on sales %
25
20
15
Sales
Rs.
Total fixed selling expenses are 10% of total cost of sales which are apportioned to the three
products in the ratio of 20:40:40.
(I)
Prepare a statement showing the apportionment of joint costs of the main product
and the two by-products.
(II)
If the by product A is not subjected to further processing and is sold at the point of
separation for which there is a market at Rs. 58,500 without incurring and selling
expenses, would you advise its disposal at this stage? Show the workings.
Cost Compilation Q.N 3

3. XYZ Ltd manufactures three products A, B & C. The actual joint expenses of manufacture
for a period was Rs. 8,000. It was estimated that the profit on each product as a percentage
of sales would be 30%, 25% and 15% respectively. Subsequent expenses were as follows:
A
Material
100
75
25
Direct Wages
200
125
50
Overhead
150
125
75
450
325
150
6,000
4,000
2,400
Sales
Prepare a statement showing the apportionment of joint expenses of manufacture over

different products.
Sanjeev Subedi Q.N 4
4. In an Oil Mill, four products emerge from a refining process. The total cost of input during
the quarter ending Aashadh, 2066 was Rs. 148,000. The output, sales and additional
processing cost were as under:
Product
Output
Additional Processing cost
Sales
after Split Off Point
value
Litres
Rs.
Rs.
8,000
43,000
172,500
4,000
9,000
15,000
2,000
----
6,000
4,000
1,500
45,000
In case these products were disposed off at the split off point that is before further
processing, the selling price would have been:
A
Rs. 15
Rs. 6
Rs. 3
Rs. 7.50
Prepare statement of profitability based on:

(I)
If the products are sold after further processing carried out in the mills;
(II)
If they are sold at the split off point.
A factory is engaged in the production of a chemical BOMEX and in the course of its
manufacture, a by product BRUCIL is produced, which after further processing has a
commercial value. For the month of April 2008, the following are summarized cost data:
__________________________________________________________________________
Joint Expenses
Separate Expenses
BOMEX
BRUCIL
__________________________________________________________________________
Rs.
Rs.
Rs.
Material
100,000
6,000
4,000
Labour
50,000
20,000
18,000
Overheads
30,000
10,000
6,000
98
34
Selling price per unit

Estimated profit per unit on sale
No of Units produced
2,000 units
2,000 units
The factory uses reverse cost method of accounting for by-products whereby the
sales value of by-product after deduction of estimated profit, post separation cost
and selling and distribution expenses relating to the by-products is credited to the
joint process cost account.
You are required to prepare statements showing:
(I)
The joint cost allocable to BOMEX
(II)
The product wise and overall profitability of the factory for April, 2008.

5. Two products P and Q are obtained in a crude form and require further processing at cost of
Rs. 5 for P and Rs.4 for Q per unit before sale. Assuming a net margin of 25 percent on cost,
their sale prices are fixed at Rs. 13.75 and Rs. 8.75 per unit respectively. During the period,
the joint cost was Rs. 88,000 and the output were:
P
8,000 units
6,000 units
Ascertain the joint cost per unit.

6.
A company processes a raw material in its department 1 to produce three products, viz., A,
B and X at the same split off stage. During a period, 180,000 kgs of raw material were
processed in department 1 at a total cost of Rs. 1,288,000 and the resultant output of A, B,
and X were 18,000 kgs, 10,000 kgs, 54,000 kgs respectively. A and B were further
processed in Department 2 at a cost of Rs. 180,000 and Rs. 150,000 respectively.
X was further processed in Department 3 at a cost of Rs. 108,000. There is no waste in
further processing. The details of sales effected during the period were as under:
A
Quantity Sold
(Kgs.)
17,000
5,000
44,000
Sales Value
( Rs.)
1,224,000
250,000
792,000
There were no opening stocks. If these products were sold at split off stage, the selling
prices of A, B and X would have been Rs. 50, Rs. 40 and Rs. 10 per kg respectively.
Required:
(I)
Prepare a statement showing the apportionment of joint costs to A, B and X.
(II)
Present a statement showing the cost per kg of each product indicating joint cost
and further processing cost and total cost separately.
(III)
Prepare a statement showing the product wise and total profit for the period.
(IV)
State with supporting calculations as to whether any or all the products should be
further processed or not.

7. ABC Ltd operates a simple chemical process to convert a single material into three separate
items, referred to here as X, Y and Z. All three end products are separated simultaneously at
a single split off point.
Product X and Y are ready for sale immediately upon split off without further processing or
any other additional costs. Product Z, however, is processed further before being sold. There
is no available market price for Z at the split off point.
The selling price quoted here can expected to remain the same in the coming year. During
2002-2003, the selling prices of the items and the total amount sold were:
X 186 tons sold for Rs. 1,500 per ton
Y 527 tons sold for Rs. 1,125 per ton
Z 736 tons sold for Rs. 750 per ton
The total joint manufacturing costs for the year were Rs. 625,000. An additional Rs. 310,000
was spent to finish product Z.
There were no opening inventories of X, Y or Z at the end of the year, the following
inventories of complete units were on hand:
X
180 tons
60 tons
25 tons
There was no opening or closing work in progress.

Required:
(I)
Compute the cost of inventories of X, Y and Z for Balance Sheet purposes and cost
of goods sold for income statement purpose as of March, 31,2008, using:
(a) Net Realizable value ( NRV ) method of joint cost allocation
(b) Constant gross margin percentage NRV method of joint cost allocation.
(II)
Compare the gross margin percentages for X, Y and Z using two methods given in
requirement (I).

8. SUNMOON Ltd produces 200,000; 30,000; 25,000; 20,000 and 75,000 units of its five
products A, B, C, D and E respectively in a manufacturing process and sells them at Rs. 17,
Rs. 13, Rs. 8 and Rs. 10 and Rs. 14 per unit. Except product D remaining products can be
further processed and then can be sold at Rs.25, Rs. 17, Rs. 12 and Rs. 20 per unit in case of
A, B, C and E respectively.
Raw material costs Rs. 3,590,000 and other manufacturing expenses cost Rs. 547,000 in the
manufacturing process which are absorbed on the products on the basis of their Net
Realisable Value. The further processing costs of A, B, C and E are Rs. 1,250,000, Rs.
150,000; Rs. 50,000 and Rs. 150,000 respectively. Fixed costs are Rs. 473,000.
You are required to prepare the following in respect of the coming year;
(a) Statement showing income forecast of the company assuming that none of its
products are to be further processed.
(b) Statement showing income forecast of the company assuming that A, B, C and
E are further processed.
Can you suggest any other production plan whereby the company can maximize its profits. If
yes, then submit a statement showing income forecast arising out of adoption of that plan.
Compilation Q. N 11
9. In a chemical manufacturing company, three products A, B and C emerge at a single split off
stage in department P. Product A is further processed in department Q, product B in
department R and product C in department S. There is no loss in further processing of any
of the three products. The cost data for a month are as under:
Cost of raw material introduced in department P
Rs. 1,268,800
Direct Wages
Rs.
384,000
96,000
64,000
36,000
Factory overheads of Rs. 464,000 are to be apportioned to the departments on direct wage
basis.
During the month under reference, the company sold all the three products after processing
them further as under:
Products
Output sold (Kg)
44,000
40,000
20,000
Selling price per Kg. (Rs)
32
24
16
There are no opening or closing stocks. If these products were sold at the split off stage, that
is, without further processing, the selling price would have been Rs. 20, Rs. 22 and Rs. 10
each per kg respectively for A, B, and C.
Required:
(i)
Prepare a statement showing the apportionment of joint costs to joint products.
(ii)
Present a statement showing product-wise and total profit for the month under
reference as per the companys current processing policy.
(iii)
What processing decision should have been taken to improve the profitability of
the company.
(iv)
Calculate the product wise and total profit arising from your recommendation in
(iii) above.
Compilation Q. N 12
10. The yield of a certain process is 80% as to the main product, 15% as to the by-product and
5% as to the process loss. The material put in process (5000 units) cost Rs. 23.75 per unit
and all other charges are Rs. 14,250, of which power cost accounted for 331/3%. It is
ascertained that power is chargeable as to the main product and by-product in the ratio of
10:9.
Draw up a statement showing the cost of the by product.
Cost Compilation 17

Joint & by Product

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Joint and By-Products

Physical Unit Method

Average Cost Method

Pre-separation point cost - Rs. 30,000

Raw Material Used ( Units )

Cost Incurred after Separation Rs.

Profit as percentage on sales %

Cost Compilation Q.N 3

Prepare a statement showing the apportionment of joint expenses of manufacture over

Additional Processing cost

after Split Off Point

Prepare statement of profitability based on:

If they are sold at the split off point.

Cost Compilation Q.N 4

Selling price per unit

The joint cost allocable to BOMEX

Cost Compilation Q.N 18

Ascertain the joint cost per unit.

Prepare a statement showing the apportionment of joint costs to A, B and X.

Cost Compilation Q.N 6

There was no opening or closing work in progress.

Cost Compilation Q.N 10

Output sold (Kg)

Selling price per Kg. (Rs)

Prepare a statement showing the apportionment of joint costs to joint products.

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