Question - Mr Abdullah is having training in Omar Co.
Omar Co produces three different products which will be sold to XYZ company. The production size for each product, and the selling price per unit, is given below.
The joint costs of processing the 1,120,000 units of products were SAR 250,000.
Mr Abdullah collected the information related to production size, selling price per unit in the split-off point and Sales value at split - off, he prepared the following table for these informations.
Production Size (units)
Product 1 603,680
Product 2 296800
Product 3 219,520
Selling Price per unit in the split-off point
Product 1 0.75
Product 2 0.45
Product 3 0.25
Total Sales Value at Split-Off
Product 1 452,760
Product 2 133,560
Product 3 54880
The work supervisor of Mr Abdullah requested him to allocate the joint costs to each product using the physical volume method. How the allocation of joint cost will be prepared by Mr Abdullah?
The academic supervisor of Mr Abdullah discussed with him the arguments explaining why he will have to use this method for allocation of joint costs?
The academic supervisor requested Mr Abdullah also to describe the split-off point and explain its significance for joint product costing. What will be the answers of Mr Abdullah to the questions of his supervisor?