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(25 MARKS) QUESTION 2 Rainbow Corporation (RC) manufactures products J, K, and L in a joint process. The company incurred RM480,000 of joint processing cost
(25 MARKS) QUESTION 2 Rainbow Corporation (RC) manufactures products J, K, and L in a joint process. The company incurred RM480,000 of joint processing cost during the period just ended and had the following data related to production Revenue and Additional Cost if Processed Beyond Spilt-off Product Sales at Spilt-off Sales RM550,000 RM540,000 RM975,000 Additional Cost RM130,000 RM240,000 RM118,000 RM400,000 RM350,000 RM850,000 An analysis revealed that all costs incurred after the split-off point are variable and directly traceable to individual product line. Required a) Determine the amount of joint costs to be allocated to product J if RC allocates joint (7 marks) b) If production of J totaled 50,000 gallons for the period, determine the relevant cost per costs on the basis of the products' sales at the split-off. gallon that should be used in decisions that explore whether to sell at the spilt-off point (5 marks) At the beginning of the current year, RC decided to process all three products beyond the s further. Briefly explain your answer or proces c) split-off point. Determine which product the company should process up to 'at split-off point' only as the company aims to maximize profit. Show your computations. d) Define the terms "sunk cost" and "opportunity cost e) Explain briefly how sunk costs can be treated when making decision. (6 marks) (5 marks) (2 marks)
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