High Quality Company produces three products in a joint manufacturing process. During July, joint cost amounted to Rs. 200,000. The following individual product information is available:

ParticularsProductXProductYProductZ

Units sold13,0009,00016,000

Sale price per unitRs. 20Rs. 15Rs. 10

Units produced15,00010,00020,000

Separable processing cost Rs.75,000Rs. 25,000Rs. 40,000

Required:

a)Work out the joint cost allocation to each product line and gross profit for each product in total using the market value cost allocation method.

A customer has offered to buy all of product Z output at the split off point for Rs. 7 each. Draw recommendations for the management to accept or reject this offer supported by computations.