Joint cost apportionment, decision on further processing and allocation of scarce capacity Three products are produced from a single process.

During one period in which the process costs are expected to be £200 000, the following outputs are expected:

Any modification work leads to a rejection rate of 10% of the input.
Required:

(a) Calculate the apportionment to each product of the joint process costs in the period if the sales value of production basis of apportionment is used. (3 marks)

(b) Show which, if any, of the products should be modified into superior products. (5 marks)

(c) Assume that the total available skilled labour hours for the period amounted to 6000 hours.
Show, giving reasons, which if any of the products should be modified.

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Output Selling price Product A 8000 tonnes 5 per tonne Product B Product C 20 000 tonnes 25 000 litres 5 per tonne 10 per litre Each product can be modified after the initial process by using inputs of skilled labour, costing 8 per hour, to create superior products: Max A, Max B and Max C, respectively. Labour require- ments and selling prices are as follows: Skilled labour Selling price Max A 1 hour per tonne 20 per tonne Max B 1.5 hours per tonne 23 per tonne Max C 2 hours per litre 22 per litre