A company operates a chemical process which produces four products K, L, M and N from a basic raw material. The company’s budget for a month is as follows:
|
Raw materials consumption |
17,520 |
|
Initial processing wages |
16,240 |
|
Initial processing overheads |
16,240 |
|
Product |
Production Kg |
Sales Rs. |
Additional Processing |
|
K |
16,000 |
1,09,600 |
28,800 |
|
L |
200 |
5,600 |
— |
|
M |
2,000 |
30,000 |
16,000 |
|
N |
360 |
21,600 |
6,600 |
The company presently intends to sell Product L at the point of split-off without any further processing. The remaining products K, M and N are to be further processed and sold. However, the management has been advised that it would be possible to sell all the four products at the split-off point without further processing and if this course was adopted the selling prices would be as follows:
|
Product |
K |
L |
M |
N |
|
Selling price per kg. (In Rs.) |
The joint costs are to be apportioned on the basis of the sales value realization at the point of split-off.
Required:
- Prepare the statement showing the apportionment of joint costs.
- Present the statement showing the product-wise and total budgeted profit or loss based on the proposal to sell product L at the split-off point and products K, M and N after further processing.
- Prepare a statement to show the product-wise and total profit or loss if the alternative strategy to sell all the products at the split-off stage was adopted.