APPORTIONMENT OF JOINT COSTS

Units Sold
SP / Unit (After further Processing except D)

SALES VALUE
Further Processing Cost (Except D)

Net Realizable Value (NRV)

Product wise NRV as a Percentage of Total NRV

JOINT COSTS
Joint Material Cost
Joint Conversion Cost

TOTAL JOINT COSTS

Joint Cost Apportioned on the basis of NRV

CONTRIBUTION FORECASTS
(Assuming all Products would be sold at split-up point)

Selling Price Per Unit at Split Up Point

Sales Value
Apportioned Joint Costs

CONTRIBUTION

CONTRIBUTION FORECASTS
(Assuming A, B, C & E are processed further)
 Sales Value
Apportioned Joint Costs
Further Processing Costs

CONTRIBUTION

MANAGEMENT DECISION (Process Further?)

CONTRIBUTION FORCASTS
(Company Adopting the Best Course of Action)
Process Further - A, C & E (B & D Sold at split up point)

Sales Value
Apportioned Joint Costs
Further Processing Costs

CONTRIBUTION (Maximum)

(Fixed Cost)

PROFIT (Maximum)
PRODUCT A PRODUCT B PRODUCT C PRODUCT D

200000 30000 25000 20000

25.00 17.00 12.00 10.00

Rs Lakhs Rs Lakhs Rs Lakhs Rs Lakhs

50.00 5.10 3.00 2.00

-12.50 -1.50 -0.50 0.00

37.50 3.60 2.50 2.00

63.45 6.09 4.23 3.38

26.25 2.52 1.75 1.40

17.00 13.00 8.00 10.00

34.00 3.90 2.00 2.00

-26.25 -2.52 -1.75 -1.40

7.75 1.38 0.25 0.60

 50.00 5.10 3.00 2.00
-26.25 -2.52 -1.75 -1.40
-12.50 -1.50 -0.50 0.00

11.25 1.08 0.75 0.60

YES NO YES Not Applicable

50.00 3.90 3.00 2.00

-26.25 -2.52 -1.75 -1.40
-12.50 0.00 -0.50 0.00

11.25 1.38 0.75 0.60

PRODUCT E TOTAL

75000
20.00

Rs Lakhs

15.00
-1.50

13.50 59.10

22.84 100.00

Rs Lakhs

35.90
5.47

41.37

9.45 41.37

14.00

10.50 52.40
-9.45 -41.37

1.05 11.03
15.00 75.10
-9.45 -41.37
-1.50 -16.00

4.05 17.73

YES

15.00 73.90
-9.45 -41.37
-1.50 -14.50

4.05 18.03

-4.73

13.30
 CONTRACT ACCOUNT

DETAILS

Materials Purchased
Additional Materials Drawn From Stores
Wages
Plant Issued
Chargeable Expenses
Apportioned Indirect Expenses

Profit recognized
Reserve Created

TOTAL

WORKINGS
Above contract is 65% completed as per
work certified by the client during the year 2014

Hence, Profit to be recognized is

Reserve Created

What does the notional profit figure actually capture?

Materials Purchased
Additional Materials Drawn From Stores
Wages
Plant Issued
Chargeable Expenses
Apportioned Indirect Expenses
 LESS
Closing Inventory of Material
Closing Value of Plant

Effective Cost Incurred on Contract during the year

COST OF WORK UNCERTIFIED

Thus, COST OF WORK CERTIFIED

But, VALUE OF WORK CERTIFIED (As Given)

Hence, Profit Component included in the Value of WC

THIS IS REFERRED TO AS THE NOTIONAL PROFIT

 FOR THE CALENDAR YEAR 2014

Rupees DETAILS

600000
100000
225000 CLOSING INVENTORY (Others)
75000 Materials
75000 Plant
25000
CLOSING WORK IN PROCESS (WIP) INVENTORY
Value of Work Certified
176000 Cost of Work Uncertified
154000

1 TOTAL

Equal to 2/3 * Notional Profit * Cash Received / WC

Equal to (Notional Profit minus Profit Recognized)

TOTAL NOTIONAL PROFIT

600000
100000
225000
75000
75000
25000
-40000
-30000

1030000

-60000

970000

1300000

330000
Rupees

40000
30000

1300000
60000

1430000

176000
154000

330000