Question

Question 3 Tricycle Ltd produces three joint products, A, B and C. These products become identifiable after the first process but are processed further before being sold. One ton of material input to the first process produces 300 units of A, 150 units of B and 50 units of C. Monthly costs and selling prices at a normal capacity level of 30 tons input are as follows: First process Fixed Variable per ton of input 10 000 2 400 Additional processing Fixed Variable per unit Selling price per unit A 12 000 1,20 B 7 000 1,60 с 1 000 2,20 At split-off point After additional processing 6,50 9,80 5,50 11,20 7,80 8,70 If a decision was taken to sell any one of the products at split-off point the additional fixed processing costs for that product would be saved in full. During November, 50 tons of input was completely processed. All sales were made after the additional process had taken place. At the end of the month a stock count took place, the results of which were: A B с 600 units 300 100 All these units had been subjected to 100% further processing and were ready for sale. Stock is valued on an absorption costing basis. There was no opening stock. Required 1. Prepare profit statement in total and per product for the month assuming that joint costs are apportioned on the basis of physical units. Advise management whether the products should be sold at split-off point or after further processing. Support your recommendations with appropriate calculations. (25) 2.

Answer 1

Wo Note :- Mouking & Joint cost is appousioned on the basis of physical units Total no. of units. - 15000 + 7500 +2500 = 25000 (11)fa) Toint fixed cost fou 80 tonn output, $4150 tonn output for produced A- 10000 X 15000 6000 25000 3000 product B - Loon X 7500 25000 product c coo00 x 2500 25voo = 1000 06) Joint vouiable cost . per tonn fou 50 tonn 12000 2400. . product A puodust B = 120000 x 15000 = 72000 - 25000 120000 27500 - 36000 2500 120000 & 2500 = 12000 25000 product (=