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ABC Company limited produces four products A, B, C and D The following information is provided 1. The joint processing requires 10,000 kilograms of raw materials input,...

      

ABC Company limited produces four products A, B, C and D

The following information is provided

1. The joint processing requires 10,000 kilograms of raw materials input, costing sh. 6 million

2. Joint process labour and material costs are sh. 5,920,000

3. Normal loss is 20% of raw material input, with product A's output being 2000 kilogram mes,
product B's output being 2,500 kilogram mes, product C's output being 2,500 kilogram mes and
the balance being from product D. No abnormal loss was reported.
4. Product A enters into process 2 incurring a further cost of sh. 1,255,000 , product B enters
process 3 incurring a further cost of sh. 1,493,750 product C enters into process 4 incurring a
further cost of sh. 1,118,750. Product D does not require additional processing. There are no
further processing costs.

5. The company‟s policy is to apportion joint costs on the basis of output

6. The selling price of each unit of products A, B C and D is sh. 1,500, sh. 3,460, sh. 2760 and sh.
1,000 respectively.

7. The company is in the process of analyzing the performance of each product in order to make
better decisions.

Required:

a) i) Cost per unit of product A
ii) Profit and loss statement for each individual product and for the company in a columnar
format
b) The company's management intends to start using the net realizable value method to allocate
joint costs. Show how this method would affect the profitability of individual products and that
of the company in (a) (ii) above.

  

Answers


Martin
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marto answered the question on February 21, 2019 at 09:26


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