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:

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 splitoff point without further processing and if this course was adopted the selling prices would be as follows:

The joint costs are to be apportioned on the basis of the sales value realization at the point of split-off.
Required:

(a) Prepare the statement showing the apportionment of joint costs.

(b) Present the statement showing the product-wise and total budgeted profi t or loss based on the proposal to sell product L at the split-off point and products K, M and N after further processing.

(c) Prepare a statement to show the product-wise and total profi t or loss if the alternative strategy to sell all the products at the split-off stage was adopted.

Transcribed Image Text:

Rs. Raw materials consumption 17,520 Initial processing wages 16,240 Initial processing overheads 16,240 Production Sales Additional Processing Product Kg Rs. costs After Split-off Rs. 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