Q.3 Three Stars Company produces three products-A, B and C by a joint process. Joint costs amount to Rs. 100000. Each batch totals 10000 gallons: 35% product A, 25% product B and 40% product C. All the three products are processed further without gain or loss in volume. Separable processing costs are product A, Rs. 4 per gallon, product B, Rs. 2 per gallon and Product C Rs.3 per gallon. Sale prices are Rs. 15, Rs. 20 and Rs. 14 for Product A, B and C respectively. Required: (15) 1. How much of the joint costs per batch will be allocated to A, B and C, assuming that joint costs are allocated on the number of gallon at split off point? 2. If the costs are allocated on NRV basis, how much of joint costs will be allocated to Product A 2 B and C? 3. Show the operating income by preparing product line income statement per batch for requirement No.1 and 2. 4. By using an additional process company converts Product B into Product Z. The selling price of Product Z would be Rs. 70 a gallon, additional processing would increase separable costs from Rs. 2 to Rs. 20 per gallon. The company would have to pay excise taxes of 15% on the selling price of Product Z. Assuming no other change in cost, what is joint cost applicable to product Z using NRV method? Should the company produce product Z? Show your computations