Question

TOPRAK A.Ş. After the separation point, it produces G10 and H8 products. 15.000 TL for G10 product, 45.000 TL for H8 product It produces new products under the names Super G10 and Super H8. 250 kg from Super G10, 400 from Super H8 kg is produced. The sales price of Super G10 is 400TL / kg, and the sales price of Super H8 is 800 TL / kg. Total combined to the point of separation

costs are 255.000 TL.

If desired, G10 product can be sold for 30.000 TL at the point of separation and H8 product can be sold for 70.000 TL. According to these data;

a) Distribute the combined cost using the gross profit rate method.

b) In your opinion, should the enterprise subject G10 and H8 products to additional production? Please explain.

c) Distribute the combined cost with the assumption that 420 kg of finished products with a market value of 10 TL / kg are released before the separation point.

Answer 1

(A)

		Super G10	Super H8		Combined
Production (Kg)	A	250	400
Sales Price (TL /KG)	B	400	800
Total Sales Value	C = A*B	1,00,000	3,20,000	D	4,20,000
Total Combined Cost				E	2,55,000
Gross profit				F=D-E	1,65,000
% of gross profit				G=F/D*100	39.29%
Gross profit	H=C*G	39,286	1,25,714
Total cost	I=C-H	60,714	1,94,286

(B)

		G10	H8
Sales value	A	30,000	70,000
cost	B	15,000	45,000
Gross profit	C=A-B	15,000	25,000
%of gross profit	D=C/A*100	50%	35.7%

Since GP ratio (50%) of G10 is higher than the Super G10 GP ratio (39.29%),so we should not continue the additional production.

Since GP ratio of (35.7) H8 is lower than Super H8 GP ration (39.29%), so we should continue the additional production.

(c)

Total Combined Cost		2,55,000
Finished product		4,200	(420*10)
Net Combined Cost		2,50,800

		Super G10	Super H8		Combined
Production (Kg)	A	250	400
Sales Price (TL /KG)	B	400	800
Total Sales Value	C = A*B	1,00,000	3,20,000	D	4,20,000
Total Combined Cost				E	2,50,800	Refer above
Gross profit				F=D-E	1,69,200
% of gross profit				G=F/D*100	40.29%
Gross profit	H=C*G	40,286	1,28,914
Total cost	I=C-H	59,714	1,91,086