NOBLE GROUP OF INSTITUTIONS – DEPARTMENT OF MANAGEMENT

MBA SEMESTER 2 COST & MANAGEMENT ACCOUNTING – 3529202

JOINT PRODUCT & BY PRODUCT – MODULE 2

PROCESS COSTING
(1) A Dairy Industry whose main product is milk gets buttermilk and butter as its by-products. From the following data,
you are required to prepare a comparative profit and loss statement, showing distinctly the profit or loss on milk,
buttermilk, and butter for the year.
(a) total costs up to the separation point – Rs.2,72,000
milk Rs. buttermilk butter
(b) sales 5,28,000 96,000 1,92,000
( c) cost after separation - 19,200 28,800
(d) selling and distribution expenses 20 20 20
as percentage to the sales

(2) the joint cost of making 50 units of product A, 100 units of product B , and 150 units of product C is Rs.900. the selling
prices of products A,B and C are Rs.2,Rs.3 ,and Rs.4,respectively.the products did not require any further processing
costs after the split-off point.
You are required to apportion the joint cost:
(a) On sales price basis. (b) On sales value basis.

(3) X ltd. produces four joint products by refining crude vegetable oil. These products have ready market value, but the
company wants to process them further for maximizing profit.
From the following information, advise which products should be processed further and which should be sold at the
split-off point. Assume all costs incurred after the split-off point are variable.

product sales value at sales value after further additional

split off processing(Rs.) processing
point(Rs.) costs(Rs.)
A 40,000 50,000 8,000
B 25,000 30,000 7,000
C 30,000 45,000 6,000
D 10,000 14,000 5,000

(4)In Manufacturing the main product A, a company processes the resulting waste materials into two by-products , B1
and B2. Using the method of working back from sales value to an estimated cost, prepare a comparative profit and loss
statement of the three products from the following data:
(a) total costs up to the separation point – Rs.68,000
A Rs. B Rs. C Rs.
(b) sales(all production) 1,64,000 16,000 1,92,000
( c) cost after separation - 4,800 7,200
(d) estimated net profit as percentage of sales value - 20% 30%
(e) Estimated selling expenses as percentage of sales value 20% 20% 20%

(5) A factory manufactures a single main product which also yields one by-product ‘x’. The main product is passed
though two processes. The by-product emerges after the second process on the same average unit cost as the main
product and passes through another manufacturing process.
For the month of June 2006, the following statistics are available:
process process by-product x after service servise
A Rs. B Rs. separation from department department

1 | EDITED BY: PROF. RIDDHI SANGHVI

 NOBLE GROUP OF INSTITUTIONS – DEPARTMENT OF MANAGEMENT
MBA SEMESTER 2 COST & MANAGEMENT ACCOUNTING – 3529202
JOINT PRODUCT & BY PRODUCT – MODULE 2

process B Rs. p Rs. q Rs.

department payroll 4000 5400 100 500 550

opening stock of material 200 1200 - - -
material issued 5200 2200 200 400 400
overheads expenses 2950 7050 200 100 100

unit A unit B unit x

opening stock 100 200 -
material issued 2600 - -
issues to process B 2000 - -
by-product X - 200 -
finished stock - 1600 200
closing stock (only material value to be taken) 700 400 -
Notes: service department expenses will be equally shared by process A and B only.
(a) Prepare cost sheets for the processes A and B and for the by-product X.
(b) Find selling rates per unit for both the main products and the by –product X.
The following additional data are provided:
(i) Selling and distribution expenses amounting to Rs.6,400 are to be distributed between the main products and the by-
product in the ratio of 3:1.
(ii) Profit is to be added: (1) for main product,1/8 of sales price (2)for by-product,1/6 of sales price.

2 | EDITED BY: PROF. RIDDHI SANGHVI