CA Inter P4 · Chapter 10
Joint Products and By-Products MCQs with Answers
8 multiple-choice questions on Joint Products and By-Products for CA Inter P4 Cost and Management Accounting. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
Joint costs of ₹4,80,000 are incurred up to the split-off point, producing 6,000 kg of product P and 10,000 kg of product Q. Using the physical units method, the joint cost apportioned to P is:
- A) ₹3,00,000
- B) ₹1,80,000
- C) ₹2,40,000
- D) ₹1,92,000
Show answer & explanation
Answer: B) ₹1,80,000
Under the physical units method, joint cost is shared in the ratio of output quantities: 6,000 : 10,000 = 3 : 5. Share of P = ₹4,80,000 x 6,000/16,000 = ₹1,80,000.
Question 2
Using the same output (P 6,000 kg, Q 10,000 kg) and joint cost of ₹4,80,000, P can be sold at the split-off point for ₹50 per kg and Q for ₹45 per kg. Under the sales value at split-off method, the joint cost apportioned to P is:
- A) ₹1,92,000.00
- B) ₹1,80,000.00
- C) ₹2,88,000.00
- D) ₹2,52,631.58
Show answer & explanation
Answer: A) ₹1,92,000.00
Sales value at split-off: P = 6,000 x ₹50 = ₹3,00,000; Q = 10,000 x ₹45 = ₹4,50,000; total ₹7,50,000. Share of P = ₹4,80,000 x 3,00,000/7,50,000 = ₹1,92,000. Using price per kg alone ignores quantities and is incorrect.
Question 3
Joint costs of ₹3,90,000 produce 6,000 kg of P and 10,000 kg of Q, neither of which is saleable at split-off. After further processing, P sells at ₹75 per kg (further cost ₹90,000) and Q sells at ₹54 per kg (further cost ₹1,20,000). Using the net realisable value method, the joint cost apportioned to Q is:
- A) ₹2,10,000.00
- B) ₹1,80,000.00
- C) ₹2,12,727.27
- D) ₹2,43,750.00
Show answer & explanation
Answer: A) ₹2,10,000.00
NRV of P = 6,000 x ₹75 - ₹90,000 = ₹3,60,000. NRV of Q = 10,000 x ₹54 - ₹1,20,000 = ₹4,20,000. Total NRV = ₹7,80,000. Share of Q = ₹3,90,000 x 4,20,000/7,80,000 = ₹2,10,000. The final sales value basis ignores further processing costs and gives a different answer.
Question 4
A by-product is sold for ₹1,20,000. Selling expenses are 10% of sales, the expected profit margin is 20% of sales and post-separation processing costs are ₹14,000. Under the reverse cost method, the amount credited to the main product's joint process account is:
- A) ₹94,000
- B) ₹84,000
- C) ₹1,08,000
- D) ₹70,000
Show answer & explanation
Answer: D) ₹70,000
The reverse cost method works back from sales value: ₹1,20,000 - selling expenses ₹12,000 - profit ₹24,000 - post-separation costs ₹14,000 = ₹70,000. This is the estimated cost of the by-product at split-off and is credited to the joint process.
Question 5
The main distinction between joint products and by-products is based on:
- A) The physical quantity of each product
- B) The relative sales value of the products
- C) Whether further processing is needed
- D) Whether the products are sold in the same market
Show answer & explanation
Answer: B) The relative sales value of the products
Joint products have relatively significant sales values and are produced simultaneously as main products. By-products have a comparatively small sales value. The classification depends on relative value, not on quantity or further processing.
Question 6
The split-off point is the point in a joint production process at which:
- A) Joint costs are apportioned for the first time
- B) By-products are scrapped
- C) The joint products become separately identifiable
- D) The process reaches its break-even level
Show answer & explanation
Answer: C) The joint products become separately identifiable
The split-off point is the stage at which joint products emerge as separately identifiable products. Costs incurred before this point are joint costs; costs after it are separable (further processing) costs traceable to individual products.
Question 7
A joint product can be sold at split-off for ₹40 per kg, or processed further and sold at ₹56 per kg. Further processing of the 5,000 kg output would cost ₹55,000 (fixed, avoidable) plus ₹4 per kg. The joint cost allocated to the product is ₹1,50,000. If the product is processed further, profit will:
- A) Increase by ₹5,000
- B) Increase by ₹25,000
- C) Decrease by ₹1,45,000
- D) Increase by ₹80,000
Show answer & explanation
Answer: A) Increase by ₹5,000
Joint cost is incurred in either case and is irrelevant. Incremental revenue = 5,000 x (₹56 - ₹40) = ₹80,000. Incremental cost = ₹55,000 + 5,000 x ₹4 = ₹75,000. Profit increases by ₹5,000, so further processing is worthwhile.
Question 8
Under the survey (point value) method of apportioning joint costs, the basis of apportionment is:
- A) The physical quantity of each product at split-off
- B) Weights assigned to each product after a technical survey of factors such as volume, selling price and technical effort
- C) The sales value of each product after further processing
- D) The contribution earned by each product
Show answer & explanation
Answer: B) Weights assigned to each product after a technical survey of factors such as volume, selling price and technical effort
The survey or point value method assigns percentage weights (points) to each joint product on the basis of a technical survey of all relevant factors, such as quantity, selling price and processing effort, and apportions joint cost in the ratio of these points.