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1.1 Scot Chemical started production in period 1 with no opening inventory. This company uses only one type of raw material to produce two products
1.1 Scot Chemical started production in period 1 with no opening inventory. This company uses only one type of raw material to produce two products which are A and B. Products A and B are liquids and they only represent 1% of the total scot Chemical sales revenue. Joint cost for period 1 is 200,000. Details of the production process and sales values are given in the table below. Predictions for sales value for products A and B is not always easy to estimate but in period 1, there is already an order to buy all production since the demand for these products have increased significatively over the last months. Product Units Produced Sales Value () PI A B 10,000 15,000 60,000 90,000 a. Calculate the allocated costs for product A and B using sales value at the split-off point, considering that all outputs are sold in period 1 and at the split-off point. (4 marks) Continued on next page... Page 1 of 8 b. Discuss the advantages and disadvantages of allocated costs using sales value at the split-off point, considering Scot Chemical's context. (6 marks) c. Define the "Physical Measure Method" and explain whether you would recommend this method to Scot Chemical
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