Question # 5

Broad-way Manufacturing Limited produces two products DL-1 & DL-2. The production involves two processes, I and II. The following data is available in respect of production during the month of August 2006. Process I Process II Rs. Rs. Material issued 375,000 100,000 Direct wages paid 150,000 200,000 Direct expenses incurred 100,000 100,000

During the month of August, materials issued to Process I and Process II were 1,250 tons and 230 tons respectively. The cost of output of Process I is charged to Process II. Incidental to production, two by-products i.e. PT-1 and PT-2 are generated in the first process and treated as a credit to Process-I.

Following additional information is also available:

Product Sales Packing Tones Rs. Cost DL-1 100 600,700 20,070 DL-2 900 1,203,500 100,350 PT-1 200 10,000 - PT-2 50 2,500 -

A shortfall occurs in Process II due to evaporation which is considered as normal loss. There was no opening or closing stocks.

Required: a) Calculate joint processing costs and apportion them between DL-1 and DL-2 on the basis of sales value. b) Prepare summary trading account for the month showing net profit of each product