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Joint cost apportionment and decisions of further processing

A process costing £200 000 produces 3 products- A, B and C. Output details are as follows:

 Product A 6 000 litres Product B 10 000 litres Product C 20 000 tonnes

Each product may be sold at the completion of the process as follows;

 Sales value at the end of the first process Product A £10 per litre Product B £4 per litre Product C £10 per tonne

Alternatively, further processing of each individual product can be undertaken to produce an enhanced product thus:

 Subsequent processing costs Sales value after final process Enhanced Product A £14 per litre £20 per litre Enhanced product B £12 per litre £8 per litre Enhanced product C £6 per tonne £16 per tonne

Required:

(a) Explain the following terms:

(i) Normal process loss;

(ii) Joint product;

(iii) By-product;

And state the appropriate costing treatments for normal process loss and for by-products.

(b) Calculate the apportionment of joint process costs to products A,B and C above.

(c) Explain whether the initial process should be undertaken and which, if any, of the enhanced products should be produced.