Market value or value on realisation

The realisation on the disposal of the byproduct
may be deducted from the total cost of production so as to arrive at the cost of the
main product. For example, the amount realised by the sale of molasses in a sugar factory
goes to reduce the cost of sugar produced in the factory.
When the by-product requires some additional processing and expenses are incurred in
making it saleable to the best advantage of the concern, the expenses so incurred should be
deducted from the total value realised from the sale of the by-product and only the netrealisations should be deducted from the total cost of production to arrive at the cost of
production of the main product. Separate accounts should be maintained for collecting
additional expenses incurred on :
(i) further processing of the by-product, and
(ii) selling, distribution and administration expenses attributable to the by-product.