Intermediate: Preparation of joint and by¬ product process account XYZ pic, a paint manufacturer, operates a process costing system. The following details related to process 2 for the month of October:

There are no further processing costs associated with either paint X or the by-product, but paint Y requires further processing at a cost of £1.50 per litre.
All three products incur packaging costs of £0.50 per litre before they can be sold.
Required:

(a) Prepare the process 2 account for the month of October, apportioning the common costs between the joint products, based upon their values at the point of separation (20 marks)

(b) Prepare the abnormal loss/gain account, showing clearly the amount to be transferred to the profit and loss account. (4 marks)

(c) Describe one other method of apportioning the common costs between the joint products, and explain why it is necessary to make such apportionments, and their usefulness when measuring product profitability.

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Opening work in progress 5000 litres fully complete as to transfers from process 1 and 40% complete as to labour and overhead, valued at 60 000 Transfer from 65 000 litres valued at cost of process 1 578 500 Direct labour 101 400 Variable overhead 80 000 Fixed overhead 40 000 Normal loss Actual output Closing work in progress 5% of volume transferred from process 1, scrap value 2.00 per litre 30 000 litres of paint X (a joint product) 25 000 litres of paint Y (a joint product) 7000 litres of by-product Z 6000 litres fully complete as to transfers from process 1 and 60% complete as to labour and overhead.