Question
Product H is produced from the mixture of material X and material Y. Processing data of product H is as follows:
Material X Material Y
Output (kg) 16,000 48,000
Raw material Conversion cost
Process (RM) 133,760 92,800
Joint costs are allocated to both raw materials based on the weight of output.
Production costs incurred in converting material X into product H are RM1.80 per kg of material X used. The successful rate of producing product H is 90%. Product H selling price is RM5.60 per kg. Material Y is sold without any processing for RM6 per kg.
Required:
a) Compute the profit/ loss per kg of product H and material Y, respectively.
b) Comment on the president's concern and suggest to him any action should be taken.
c) Choose a recommended joint cost apportionment method and demonstrate its calculation of the apportionment for product H. Then comment on this method of apportionment.