Syarikat HiCalcium is the producer of a milk-based product. In December, the company purchases 10,000 litres of fresh milk, costing RM6,000 and process them, which involves RM14,000 conversion costs. The process produces two joints products, i.e. 4,000 litres liquid skimmed and 6,000 litres milk cream.

There are active markets for both of the joint products. Liquid skimmed and milk cream can be sold at RM5 per litre dan RM8 per litre, respectively.

The company's policy is to process the joint products further. When processing them separately, liquid skimmed resulted in milk powder, and milk cream resulted in yoghurt. Information on milk powder and yoghurt for December are as below:

product additional production sales (kg) selling price

costs (rm) (kg) per kg (rm)

milk powder 12,250 3,500 3,500 12

yogurt 12,750 4,400 4,400 18

Required:

a)Determine the joint costs allocated to joint products using the following method:

i.Physical unit

ii.Sales value at the split-off point

iii.Net realisable value

iv.Constant gross margin percentage

b)Determine whether each the joint products should be sold at the split-off point or further process. Show your computation clearly.

c) The use of the physical unit in allocating joint costs sometimes resulted in confusion and affected the effectiveness of decision made. Give one (1) example to describe this situation.