Problem:
Apportionment of joint costs
A business uses process costing to establish stock valuations and profitability of its products. Output from the process consists of three separate products. Two joint products and a by-product. Details of the process is as follows:
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Input costs:
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Materials
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£45 625 for 12 500 kg
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Labour
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£29 500
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Overheads
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£26 875
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The process is expected to lose 20% of the input. This is sold for scrap for £4 per unit.
The following details relate to the output from the process:
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Product
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Type
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% of output
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Final sales value per unit
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Further costs to complete
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A
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Joint
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50
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£20
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£10
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B
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Joint
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40
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£25
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C
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By-product
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10
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£2
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Joint costs are allocated on the basis of net realizable value at split-off.
Required:
(a) Establish the total cost of the output from the process.
(b) Calculate the profit per unit for each of the joint products, A and B.\