PREPARATION OF JOINT AND BY PRODUCT PROCESS ACCOUNT.

XYZ Ltd, a paint manufacturer, operates a process costing system. the following details relate to process 2 for the month of October: opening work in prgess: 5000 liters fully complete as to transfers from process 1 and 40% complete as to labour and overhead, valued at R60 000.

Transfer from process 1: 65 000litres valued at cost of R578500

Direct labour: R101400

Variable overhead: R80 000

Fixed Overhead: R40 000

Normal loss: 5% of volume transferred from process 1, scrap value R2 per litter.

Actual output: 30 000 litres of paint X (a joint product) 25 000 litres of paint Y (a joint product) 7000 litres of by product Z

Closing work in progress: 6000 litres fully complete as to transfers from process 1 and 60% complete as to labour and overhead.

The final selling price of product X,Y and Z are: paint X R15 per litre paint Y R18 per litre product Z R4 per litre

there are no futher processing costs associated with either paint X or the by product, but paint Y requires futher processing at a cost of R1.50 per liter

all three products incur packaging costs of R0.50 per liter before they can be sold.

required: a. prepare the process 2 account for the month of October, apportioning the common costs between the joint products, based on their values at the point of separation. b. prepare the abnormal loss/gain account, showing clearly the amount to be transferred to the profit and loss account. c. describe one other method of apportioning the common costs between the joint products, and explain why it is necessary to make sure apportionments, and their usefulness when measuring product profitability.