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


(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.