Question

Tutorial 2 Question 1 (14 Marks – 25 Minutes) Supp 2013 Nov Dischem CC manufactures three products in a single process. The following are the actual results for April 2013: A B C Units Units Units Production at 100% capacity 20 000 25 000 10 000 Sales 20 000 25 000 10 000 There was no inventory on hand at the beginning of the month and no losses occurred during the month. A B C Selling price per unit N$12.00 N$8.00 N$16.00 The following costs are incurred in the joint process: Direct material N$224 400 Direct labour 93 500 Manufacturing overheads 149 600 Each product can be processed further into a superior product namely A2, B2, and C2. The following information is applicable if products are processed further: A2 B2 C2 N$ N$ N$ Selling price per unit 18.00 12.00 22.00 Additional variable cost per unit: - Direct labour 1.50 2.00 2.00 - Variable overhead 1.00 1.00 2.00 REQUIRED: MARKS Allocation of the joint costs to the three products using the following method of allocation: 1.1 Physical measures method 5 1.2 Net realisable value method 9

Answer 1

Req 1.
Allocation of Joint cost under Physical Measures:
Total Joint cost:
Direct Material			224400
Direct Labouor			93500
Manufacturing Overheads			149600
Total Joint cost:			467500
Units produced:
Product A		20000
Product B		25000
Product C		10000
Total Units		55000
Allocation of Joint cost:
Share of Product A (467500/55000*20000):				170000
Share of Product B (467500/55000*25000):				212500
Share f Product C (467500/55000*10000):				85000
Total Joint Cost				467500
Req b:
Allocation on the basis of Net realisable value
Product	Selling price	Units	Total	Further		Total Further	Net realisable	% of Net		Joint cost	Allocation of
	after further		Sales price	Processing cost per unit		Proc. Cost	Value	Realisable value			Joint cost
A	18	20000	360000	2.5		50000	310000	43.36%		467500	202692.3
B	12	25000	300000	3		75000	225000	31.47%		467500	147115.4
C	22	10000	220000	4		40000	180000	25.17%		467500	117692.3
				TOTAL		165000	715000				467500