CAF-5 · Chapter 18 · Question 8 of 20
(Joint Products & By-Products with NRV) A joint process incurs Rs. 400,000 and yields 10,000 kg of M, 5,000 kg of N, and 2,000 kg of By-product B (NRV Rs. 10/kg). NRV of M is Rs. 50/kg at split-off. N needs Rs. 20/kg further processing to sell for Rs. 80/kg. Using NRV method, what Joint Cost is allocated to Product N?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 142,500
Explanation
Net Joint Cost = 400,000 - (2,000*10) = 380,000. NRV(M) = 10k*50 = 500k. NRV(N) = 5k*(80-20) = 300k. Total NRV = 800k. Allocation to N = (300k/800k)*380,000 = Rs. 142,500.
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