In a factory producing joint products of two varieties, the following data are extracted from the books:
|
Total Rs. |
|
|
Sales of products A&B |
15,00,000 |
|
Direct material |
4,50,000 |
|
Direct labour |
2,20,000 |
|
Variable overhead (150% a labour) |
3,30,000 |
|
Fixed overhead |
4,00,000 |
The analysis of sales reveals that the percentage of sale of Product A is66 2/3%.
The management contemplates to process further the joint products so that they could be sold at higher rates. Facilities for this are available. The additional expenditure for the further processes and total sales expected at higher selling prices are given as follows. Make your recommendations presenting the effect of the proposal.
|
Product A |
Product El |
Total |
|
|
Sales after further processing |
12,00,000 |
6,00,000 |
18,00,000 |
|
Additional material |
1,00,000 |
40,000 |
1,40,000 |
|
Additional direct labour |
40,000 |
16,000 |
56,000 |