CA Inter P4 · Chapter 10 · Question 4 of 8
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:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) ₹70,000
Explanation
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.
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