1. Homebase is a specialist manufacturer of different types of wall tiles; ceramic and stone. Homebase excavates blocks of granite from its quarry from its joint processes of quarry and cutting. Two joint products (ceramic and stone) are produced along with a by-product called Mutter.

Ceramic tiles are cut, polished, and engraved in a variety of standard shapes, sizes, and patterns and distributed to their different stores located throughout the UK for sale. The ceramic tiles are cut and polished to meet specifications of contractors who each year are ordered by contractors for office buildings. The small pieces of ceramic tiles resulting from the cutting and shaping process are crushed and sold to farm-supply outlets as poultry grit.

Homebase has provided the following costs and output information:

Process

Cost Tons of Output

Quarry 350000 100000

Cutting 250000 90000

Ceramic 300000 25000

Stone 400000 60000

Grit 10000 5000

Quarry and Cutting are joint processes. A local farm-supply distributor purchases all of the grit that is produced at 40 per ton. Assume that Homebase uses the physical units method to allocate joint costs.

Required:

a) What would be the cost per ton of Ceramic and Stone slabs, assuming that the grit is accounted for as "other income"?

b What would be the cost per ton of Ceramic and Stone slabs assuming that the grit is accounted for as by-product revenue deducted from the main product cost?00