A chemical product manufacturer, Bramley pic, operates three manufacturing departments. Raw material processed in Department 1 yields

Question:

 A chemical product manufacturer, Bramley pic, operates three manufacturing departments. Raw material processed in Department 1 yields two joint products, A and B. Normally 1 litre of input into that department produces 0.6 litre of A and 0.3 litre of B. Although each of these products could be sold at the split off point (and there is a ready demand for each in this state) they are normally refined further, A in Department 2 and B in Department 3. The additional processing enhances their saleable values as follows:image text in transcribedimage text in transcribed

The joint costs in Department 1 have been apportioned on the basis of the output (in litres) of A and B. The costs incurred and the processing efficiency for the period to which the above accounts relate can be assumed to be representative of current conditions. All work-in-process is complete as far as material content is concerned and is one half processed.

(a) You are required to comment on the profitability of the individual departmental operations and the utility of the process accounts for decision making purposes.

(b) Give your opinions on the 'sales value' methods of apportioning joint costs. Use the above example to illustrate your answer.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Cost Accounting

ISBN: 9780434908301

1st Edition

Authors: Mark Lee Inman

Question Posted: