Question
Jameel Ltd produces three joint products A, B and C, from a common process. Annual costs for the joint process are as follows: Direct materials
Jameel Ltd produces three joint products A, B and C, from a common process. Annual costs for the joint process are as follows:
Direct materials 155,000
Direct wages 60,000
Variable overheads (150% of direct wages) 90,000
Fixed overheads 90,000
The budgeted outputs and selling prices at separation point are:
Production Prices
Tons per ton
A 2,000 100
B 1,000 150
C 500 200
Production capacity is available to process further any one or all of the products. Additional labour and materials would be required in each case, and the following estimates have been prepared of costs and sales values if further processing is carried out.
A B C
Quantities (tons) 2,000 1,000 500
Additional materials 12,000 15,000 10,000
Additional direct wages 12,000 10,000 10,000
Total sales value (after further processing) 240,000 210,000 150,000
Required:
The management wishes to know which products should be sold or processed further, and the difference in the anticipated trading results between processing and selling at separation point.
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