D E G (2+2+3+3= Marks Obtained 10 MARKS) 1 F2 fx Evaluator's comments: A B Sudha Dairy manufactures butter and Liquid Skim milk products. It purchases raw milk and processes them into these two joint products, one is Butter and other is Liquid Skim milk products. These two joint products become separately identifiable at a single split off point. Every 500 litres of Raw milk yields 50 litres of Butter and 75 litres of Liquid Skim Milk. Total Raw milk processed is 5,000 litres and the cost 2 of processing Raw Milk to splitoff point (including purchase of raw milk) = Rs 4,00,000. 3 The Butter is further processed into Cream. Every 50 litres of butter yield 200 kg of cream. The Liquid Skim milk is further processed into milk chocolate. Every 75 litres Liquid Skim milk yield 340 kg of milk chocolate. 4 An overview of the manufacturing operations at Sudha Dairy is follow: 5 Production and Sales data for August are: 6 7 Cream 8 Milk Chocolate Production 2,000 kg 3,400 kg Sales 2,000 kg 3,400 kg Selling Price Rs 200 per kg Rs 250 per kg The August separable costs of processing Butter into Cream are Rs 2,12, 500. The August separable cost of processing Liquid skim Milk into 9 milk chocolate are Rs 4,37,500. Sudha Dairy fully processes both of its intermediate products into Cream or milk chocolate. There is an active market for these intermediate 10 products. In August, Sudha Dairy could have sold the Butter for Rs 420 a litre and the Liquid skim Milk for Rs 250 a litre. Required: Calculate how the joint costs of Rs 4,00,000 would be allocated between the Butter/Cream and Liquid Skim Milk/Milk-chocolate under the following methods appropriately: 11 12 a. Sales value at splitoff 13 b. Physical measure (litres) 14 C. NRV 15 d. Constant gross-margin percentage NRV 16 17 18 ANSWER & CALCULATIONS Evaluator's comments: