JOINT & BY-PRODUCT CA SUNIL KESWANI 1

Joint & By-Product

Question – 1
Calculate the estimated cost of production of by-products X and Y at the point of separation
from the main product:
By-product X By-product Y
` `
Selling price per unit 12 24
Cost per unit after separation from main product 3 5
Units produced 500 200
Selling expenses amount to 25% of Total Works Cost – i.e. including both pre-separation and
post-separation works cost. Selling prices are arrived at by adding 20% to Total Cost – i.e., the
sum of works cost and selling expenses.

Question – 2
Two products P and Q are obtained in a crude form and require further
processing at a cost of `5 for P and `4 for Q per unit before sale.
Assuming a net margin of 25 per cent on cost, their sale prices are fixed
at `13.75 and `8.75 per unit respectively. During the period, the joint
cost was `88,000 and the output were:
P 8,000 units
Q 6,000 units
Ascertain the joint cost per unit.

Question – 3
A factory producing article P also produces a by-product Q which is further processed into
finished product. The joint costs of manufacture are given below:
`
Material 5,000
Labour 3,000
Overheads 2,000
10,000
Subsequent costs are given below:
P Q
Material `3,000 `1,500
Labour 1,400 1,000
Overheads 600 500
5,000 3,000

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 JOINT & BY-PRODUCT CA SUNIL KESWANI 2
Selling prices are: P – `16,000 and Q – `8,000
Estimated profits margin on selling prices are 25% for P and 20% for Q.
Assume that selling and distribution expenses are in proportion of sales prices. Show how you
would apportion joint costs of manufacture and prepare a statement showing cost of production
of P and Q. Also prepare Production Accounts.

Question – 4
The SK Oil company purchase crude vegetable oil. It does refining of the same. The refining
process results in four products at the split off point: M, N, O & P.
Product O is fully processed at the split off point. Product M, N, & P can be individually further
refined into ‘Super M’, ‘Super N’ and ‘Super P’. In the most recent month (October), the output
at split off point was:
Product M 3,00,000 gallons
Product N 1,00,000 gallons
Product O 50,000 gallons
Product P 50,000 gallons
The joint cost of the purchasing the crude vegetable oil and Processing it were `40,00,000.
Sunshine had no beginning or ending inventories. Sales of Product O in October were
`20,00,000. Total output of products M, N and P was further refined and then sold. Data related
to October are as follows:
Further processing cost
Product to make super products Sales
Super M `80,00,000 `1,20,00,000
Super N `32,00,000 `40,00,000
Super P `36,00,000 `48,00,000
Sunshine had the option of selling products M, N and P at the split off point. This alternative
would have yielded the following sales for the October, production:
Product M `20,00,000
Product N `12,00,000
Product P `28,00,000
You are required to answer:
(a) How the joint cost of `40,00,000 would be allocated between each
product under the following methods
(i) Sales value at split off point
(ii) Physical output (gallon)
(iii) Estimated net realizable value
(b) Could sunshine have increased its October operating profits by making different
decisions about the further refining of product M, N or P? Show the effect of any change
you recommend on operating profits.

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 JOINT & BY-PRODUCT CA SUNIL KESWANI 3

Question – 5
A Factory produces two products, ‘A’ and ‘B’ from a single process. The joint processing costs
during a particular month are:
Direct material `30,000
Direct labour `9,600
Variable Overheads `12,000
Fixed Overheads `32,000
Sales: A – 100 units @ `600 per unit; B – 120 units @ `200 per unit.
Apportion joint costs on the basis of:
(i) Physical Quantity of each product.
(ii) Contribution Margin method, and
(iii) Determine Profit or Loss under both the methods.

Question – 6
From a single raw material, a chemical company produces three products A, B and C. Product
A is considered to be a by-product and products B and C are treated as major joint products. In
process I, by-product A is obtained and the remaining output passes to process II where
products B and C are obtained.
During January, the cost of materials consumed was `3,600 and operating costs were:
Process I: `6,000 and Process II: `7,500
Work-in-progress was negligible at both the beginning and end of the month. Production and
sales data for the month is given below:
Product Production Sales
A 6,000 litres 3,000 litres at 5 paise per litre
B 9,000 kgs 7,500 kgs at `2 per kg
C 2,500 kgs 1,500 kgs at `4.80 per kg
Stocks as on 1st Jan were:
Product Quantity Rate
A 600 litres 5 paise per litre
B 750 kgs `1.5 per kg
C 50 kgs `3.75 per kg
You are required to prepare statement showing: (a) the value of the stock of each product as on
31st January, employing market price for A and apportioning the remaining cost between B and
C according to the sales value of the output and (b) gross profit for January.

Question – 7
A Company produces two joint products P and Q in 70:30 ratio from basic raw materials in
department A. The input output ratio of department A is 100:85. Product P can be sold at the
split off stage or can be processed further at department B and sold as product AR. The input

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 JOINT & BY-PRODUCT CA SUNIL KESWANI 4
output ratio is 100:90 of department B. The department B is created to process product P only
and to make it product AR.
The selling prices per kg are as under:
Product P `85
Product Q `290
Product AR `115
The production will be taken up in the next month.
Raw materials 8,00,000 kgs
Purchase price `80 per kg

Deptt. A (`Lacs) Deptt. B (`Lacs)

Direct materials 35.00 5.00
Direct labour 30.00 9.00
Variable overhead 45.00 18.00
Fixed overheads 40.00 32.00
Total 150.00 64.00
Selling Expenses `in lacs
Product P 24.60
Product Q 21.60
Product AR 16.80
Required:
(i) Prepare a statement showing the apportionment of joint costs if Joint Costs are
apportioned in the proportion of NRV at Split-off point.
(ii) State whether it is advisable to produce product AR or not.

Question – 8
SK Ltd. produces three joint products. In the period just ended costs of production totalled
`5,09,640. Output from the process during the period was:
Product W 2,76,000 Kilos
Product X 3,34,000 Kilos
Product Y 1,34,000 Kilos
There was no opening stock of the three products. Products W and X are sold in this stage.
Product Y is subjected to further processing. Sales of products W and X during the period were:
Product W 2,55,000 Kilos at `0.945 per kilo
Product X 3,12,000 Kilos at `0.890 per kilo
1,28,000 kilos of product Y were further processed during the period. The balance of the period
production of the three products W, X and Z remained in stock at the end of the period. The

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 JOINT & BY-PRODUCT CA SUNIL KESWANI 5
value of closing stock of individual products is calculated by apportioning costs according to
weight of output.
The additional costs in the period of further processing product Y, which is converted into
product Z, were:
Direct Labour `10,850
Production overhead `7,070
96,000 Kilos of product Z were produced from the 1,28,000 kilos of product Y. A by-product
BP is also produced which can be sold for `0.12 per kilo. 8,000 kilos of BP were produced
and sold in the period.
Sales of product Z during the period were 94,000 kilos, with total revenue of `1,00,110.
Opening stock of product Z was 8,000 Kilos @ `1.08 per kg. The FIFO method is used for
pricing transfers of product Z to cost of sales. Selling and distribution costs are charged to all
main products when sold, at 10% revenue.
Required:
(a) Prepare a profit and loss statement for the period, identifying separately the profitability
of each of the three main products.
(b) C Ltd. has now received an offer from another company to purchase the total output of
product Y (i.e. before further processing) for `0.62 per Kilo. Calculate the viability of
this alternative. Consider selling & distribution overheads as fixed expenses for making
your evaluation.

Question – 9
A company’s plant processes 6,750 units of a raw material in a month to produce two products
‘M’ and ‘N’. The process yield is as under:
Product M 80%
Product N 12%
Process loss 8%
The cost of raw material is `80 per unit.
Processing cost is `2,25,000 of which labour cost is accounted for 66%.
Labour is chargeable to products ‘M’ and ‘N’ in the ratio of 100:80.

Prepare a comprehensive cost statement for each product showing:

(i) Apportionment of joint cost among products ‘M’ and ‘N’ and
(ii) Total cost of the products ‘M’ and ‘N’.

Question – 10
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 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 A, B and X were
18,000 kgs, 10,000 kgs and 54,000 kgs respectively. a and B were further processed in
Department 2 at a cost of `1,80,000 and `1,50,000 respectively.

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 JOINT & BY-PRODUCT CA SUNIL KESWANI 6
X was further processed in Department 3 at a cost of `1,08,000. There is no waste in further
processing. The details of sales effected during the, period were as under:
A B X
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 A, B and X would have been `50, `40 and `10 per kg respectively.

Required:
(a) Prepare a statement showing the apportionment of joint costs to A, B and X.
(b) Present a statement showing the cost per kg of each product indicating joint cost, further
processing cost and total cost separately.
(c) Prepare a statement showing the product wise and total profit for the period
(d) State with supporting calculations as to whether any or all the products should be further
processed or not.

Question – 11
Three products X, Y and Z alongwith a byproduct B are obtained again in a crude state which
require further processing at a cost of `5 for X; `4 for Y; and `2.50 for Z per unit before sale.
The byproduct is however saleable as such to a nearby factory. The selling prices for the three
main products and byproduct, assuming they should yield a net margin of 25% of cost, are
fixed at `13.75, `8.75 and `7.50 and `1.00 respectively – all per unit quantity sold.

During a period, the joint input cost including the material cost was `90,800 and the respective
outputs were:
X 8,000 units
Y 6,000 units
Z 4,000 units
B 1,000 units
By-product should be credited to joint cost and only the net joint costs are
to be allocated to the main products. Calculate the joint cost per unit of each
product and the margin available as a percentage on cost.

Question – 12
A company manufactures one main product (M1) and two by-products B1 and B2 for the month
of January 2013, following details are available. Total Cost upto Separation Point `2,12,400.
M1 B1 B2
Cost after separation - `35,000 `24,000
No. Of units produced 4,000 1,800 3,000
Selling price per unit `100 `40 `30
Estimated net profit as percentage to sales value - 20% 30%
Estimated selling expenses as percentage to sales value 20% 15% 15%
There are no beginning or closing inventories.

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 JOINT & BY-PRODUCT CA SUNIL KESWANI 7
Prepare statement showing:
(a) Allocation of joint costs; and
(b) Product wise and overall profitability of the company for January 2013.

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