Question

Question 2 Comfy Confections Company purchases cocoa beans and processes them into cocoa butter, a powder, and shells. The standard yield from processing each 100-grams sack of cocoa beans is 20 grams of butter, 45 grams of powder, and 35 grams of shells. The powder can be sold for RM0.90 per gram and the butter for RM1.10 per gram at the split-off point. The cost of the cocoa beans up to the split-off point cost is RM54 Required 1. Compute the joint cost allocated to cocoa butter and cocoa powder produced from 100 grams of cocoa beans using the sales value at split off point method. (7 marks) 2. Use the physical-measures method to allocate costs (5 marks) 3. Assume that the cocoa butter could be sold either at split off or after additional processing The additional processing costs RM0.15 per gram, at which point the butter can be sold for RM 1.60. Allocate the joint costs using the net realizable value method. (7 marks) 4. Assume that the 35 grams shell can be further process into a by-product for the use in farming. This is done by additional processing that cost RM0.55. The by-product can be sold at RM2.05. Calculate the by-product NRV and explain what we do with the amount of by- product calculated. (4 marks) 5. Explain the difference between joint and by products (2 marks)

Answer 1

1. Joint Costs allocated using Sales Value at Slit Off Point Method

Particulars	Cocoa butter	Cocoa powder
Units (Weight)	20 gms	45 gms
Sales price at split-off/gm	RM 1.10/gm	RM 0.90 /gm
Sales Value at split-off	RM 22	RM 40.5
Allocation of Joint Costs	RM 19	RM 35

               Note: Calculation of Joint Costs

                         Cost of Coffee beans of 100 gms sack= RM 54

2. Joint Costs allocated using Physical Measures Method

Particulars	Cocoa butter	Cocoa powder
Units(Weight of product)	20 gms	45 gms
Allocation of Joint Costs =Units*total joint cost/Total units	RM 16.62	RM 37.38

3. Joint costs allocated on basis of Net Realisable value

Particulars	Cocoa butter	Cocoa powder
Sales price after processing	RM 1.60
Less: Seperable Costs	RM 0.15
Net Realisable value after processing per unit	RM 1.45
Quantity	20 gms
Net Realisable value after processing	RM 29
Sales value at split off		RM 40.5
Joint costs allocated on basis of Net Realisable value	RM 22.53	RM 31.47

4. Calculation of NRV of By-Product

Particulars	Cocoa shells
Sales price after processing	RM 2.05
Less: Seperable Costs	RM 0.55
Net Realisable value after processing per unit	RM 1.50
Quantity	35 gms
Net Realisable value after processing	RM 52.5

The net realizable value of the by-product is to be deducted from the Total Joint Costs.

Therefore Joint costs will now be=RM 54-RM 52.5=RM 1.5