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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.

Particulars Product A Product B Total

Sales 100 x 60 = 6,000 120 x 30 = 3,600 9,600
Less: lariable Costs in the ratio 100: 120 2,000 2,400 4,400
Contribution = Sales Less Variable Costs 4,000 1,200 5,200
Less: Fixed Costs in ratio of Contribution 40:12 3,000 900 3,900
Profit = Contribution Less Fixed Costs 1,000 300 1,300

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

8. Total Costs per kg = (4 + 7) Rs. 45 Rs. 43 Rs. 9

9. Sales Value (given) Rs. 12,24,000 Rs. 2,50,000 Rs. 7,92,000
10. Sale Quantity (given) 17,000 kgs 5,000 kgs 44,000 kgs
11. Sale Price per kg = (9 ÷10 ) Rs. 72 Rs. 50 Rs. 18

12. Profit per kg = (11-8) Rs. 27 Rs. 7 Rs. 9

13. Total Profit = (10 x 12) Rs. 4,59,000 Rs. 35,000 Rs. 3,96,000 Rs. 8,90,000

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Problem No. 4
1. Joint Costs Apportionment Statement (in Rs. Lakhs)
Particulars M N O P Total
Method 1: Sales Value at Split Off 20.00 12.00 20.00 28.00 80.00
Joint Costs apportioned as above 10.00 6.00 10.00 14.00 40.00
Method 2: Physical Quantity (gallons) 3 1 0.5 0.5 5
Joint Costs apportioned as above 24.00 8.00 4.00 4.00 40.00
Method 3: Final Sales Value 120.00 40.00 20.00 48.00 228.00
Less: Further Processing Cost 80.000 32.00 - 36.00 148.00
Estimated NRV 40.00 8.00 20.00 12.00 80.00
Joint Cost apportioned on NRV 20.00 4.000 10.00 6.00 40.00

2. Decision Making on Further Processing

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

1. Joint Cost Apportionment Statement

Particulars Anarol EstyI BetryI Total

a. Gallons Produced 2,000 3,000 5,000 10,000
b. Joint Cost Allocation based on (a) Rs.4,00,000 Rs.6,00,000 Rs.10,00,000 Rs.20,00,000
c. Sales Price per unit at split – off Rs.350 Rs.240 Rs.200
d. Sales Value at Split off = (a x c) RS.7,00,000 Rs.7,20,000 Rs.10,00,000 Rs.24,20,000
e. Joint Cost Allocation based on (d) Rs.5,78,512 Rs.5,95,041 Rs.8,26,446 Rs.20,00,000
f. NRV at split – off per unit Rs.350 Rs.240 Rs.330
g. NRV at split off = (a x f) Rs.7,00,000 Rs.7,20,000 Rs.16,50,000 Rs.30,70,000
h. Joint Cost Allocation based on (g) Rs.4,56,026 Rs.4,69,055 Rs.10,74,919 Rs.20,00,000

2. Further Processing Decision:

Product Production Issued for further process After further processing

Anarol 2,000 gallons 2,000 gallons 3,500 gallons of input qtty
EstyI 3,000 gallons 1,500 gallons → 2,000 gallons of Output
BetryI 5,000 gallons

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
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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

3. Statement showing monthly profitability

For existing mfrg operations For processing of P into S

Particulars
P Q Total S Q Total
a. Sales Quantity (Kgs.) 47,500 95,000 1,42,000 47,500 95,000 1,42,000
b. Sales Price per kg Rs.12 RS.20 Rs.15 Rs.20
c. Sales Revenue (a x b) Rs.5,70,000 Rs.19,00,000 Rs.24,70,000 Rs.7,12,500 Rs.19,00,000 Rs.26,12,500
d. Processing Cost (Note 1) Rs.5,10,000 Rs.17,00,000 Rs.22,10,000 Rs.6,95,000 Rs.17,00,000 Rs.15,95,000
e. Profit (c – d) Rs.60,000 Rs.2,00,000 Rs.2,60,000 Rs.17,500 Rs.2,00,000 Rs.2,17,500

Conclusion: Further processing of P is not recommended as it results in a lower profit of P.

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
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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

2. Computation of Total Joint Costs to be apportioned

Particulars Rs.
a. Basic Raw Material (8,00,000 kg at Rs. 80 per kg) Rs. 6,40,00,000
b. Direct Materials (Department A) Rs. 35,00,000
c. Direct Labour (Department A) Rs. 30,00,000
d. Variable OH (Department A) Rs. 45,00,000
e. Fixed OH (Department A) Rs. 40,00,000
Total Joint Costs Rs. 7,90,00,000

3. Further Processing Decision, i.e. Product P into Product AR

Particulars Department A Department B
Sale Value of AR 4,28,400 kg X Rs. 115 4,92,66,000
Less: Sale Value of P 4,76,000 kg X Rs. 85 4,04,60,000
Additional Revenue from Sale of Product AR 88,06,000
Add: Savings in Selling Expenses, i.e. Benefit (Rs.24,60,000 – Rs.16,80,000) 7,80,000
Total Benefit 95,86,000
Less: Additional Production Costs of AR in Dept B Total Costs of Department B 64,00,000
Net Additional Benefit in further processing 31,86,000

4. Apportionment of Joint Costs under different methods

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

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d. Sale Value at Split Off (a x c) Rs.4,04,60,000 Rs.5,91,60,000 Rs.9,96,20,000
e. Joint Costs apportioned in Sale Value basis, Rs.3,20,85,000 Rs.4,69,15,000 Rs.7,90,00.000
i.e. ratio of (e) (40460 : 59160)
f. Sale Price p.u, after further processing Rs.115 per kg Rs.290 per kg
g. Sale Value after further processing as per Rs.4,92,66,000 Rs.5,91,60,000
Optimal Decision in WN 3 above [See Note] (4,76,000 X 90% (2,04,000X290)
X 115)
h. Selling Expenses (given) Rs.16,80,000 Rs.21,60,000
i. Further Processing Costs Rs.64,00,000 -
j. Estimated NRV at Split-Off (g-h-i) Rs.4,11,86,000 Rs.5,70,00,000 Rs.9,81,86,000
k. Joint Costs apportioned based on Estimated Rs.3,31,38,000 Rs.4,58,62,000 Rs.7,90,00,000
NRV at split-off, (i.e. 41186:57000)

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

2. Cost Apportionment Statement

Particulars Main Product By Product Total
a. Cost of Materials (5,000 kgs X Rs.23.75 per kg Rs. 1,00,000 Rs. 18,750 Rs. 1,18,750
= Rs. 1,18,750) apportioned in quantity ratio
i.e. 4,000:750
rd
b. Other Overheads (excluding Power), i.e. 2/3 Rs. 8,000 Rs. 1,500 Rs. 9,500
of Rs.14,250 = Rs.9,500, apportioned in
quantity ratio i.e. 4,000 : 750
rd
c. Power Cost i.e. 1/3 of Rs. 14,250 = Rs. Rs. 2,500 Rs. 2,250 Rs. 4,750
4,750, apportioned in given ratio i.e. 10:9
Total Costs Rs. 1,10,500 Rs. 22,500 Rs. 1,33,000

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

Rs. 675 Nil

4. Net Cost of Main Product X (2–3) Rs. 1,45,000 Rs. 1,46,375
5. Cost per kg of Main Product X Rs. 1,45,000 Rs. 1,46,375
= Rs.20.00 per kg = Rs.20.19 perkg
7,250kg 7,250kg

THE END
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