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      Question

      A chemical plant produces two main products, Alpha and

      Beta, from a joint process. The total joint costs incurred up to the split-off point are β‚Ή20,00,000. At the split-off point, the total sales value of Alpha is β‚Ή18,00,000 and Beta is β‚Ή12,00,000. Alpha requires further processing at a cost of β‚Ή2,00,000 before it can be sold. Using the Relative Sales Value method (at split-off), what is the cost of inventory allocated to Product Alpha?Β 
      A β‚Ή10,00,000 Correct Answer Incorrect Answer
      B β‚Ή12,00,000 Correct Answer Incorrect Answer
      C β‚Ή14,00,000 Correct Answer Incorrect Answer
      D β‚Ή8,00,000 Correct Answer Incorrect Answer
      E β‚Ή15,00,000 Correct Answer Incorrect Answer

      Solution

      Ind AS 2 requires joint costs to be allocated on a rational and consistent basis. The relative sales value at the split-off point is a standard basis. Β  Total Sales Value at Split-off: 18,00,000 ( π΄π‘™π‘β„Žπ‘Ž )+12,00,000 ( π΅π‘’π‘‘π‘Ž )=30,00,000 Β  Alpha's Proportion = 18,00,000Γ·30,00,000 = 60% Thus, allocation of Joint Cost for Alpha = Β  60% of 20,00,000 = 𝟏𝟐 , 𝟎𝟎 , 𝟎𝟎𝟎 Β  Note: The further processing cost (β‚Ή2,00,000) is added to the cost of Alpha after the joint cost allocation if we were calculating the "total cost," but the question asks for the allocated joint cost. Under Ind AS 2, joint costs are allocated based on the value at the split-off point itself.

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