Costs and Joint Cost Allocation

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1 ‘produced as/ sold as’ matrix Sold as | Produced as | | | 401 | 402 | 403 | 404 | 405 | Total | | 401 | 90,000 | 10,000 | | | | 100,000 | | 402 | | 110,000 | 30,000 | | | 140,000 | | 403 | | | 60,000 | 40,000 | | 100,000 | | 404 | | | | 20,000 | 20,000 | 40,000 | | 405 | | | | | 20,000 | 20,000 | | Total | 90,000 | 120,000 | 90,000 | 60,000 | 40,000 | 400,000 |

2
Physical Measures Method | Produced | Proportion | Joint Cost Allocation | Unit Cost | 401 | 90,000 | (90,000/400,000)0.225 or 22.5% | (200,000 x 0.225)45,000 | (45,000/90,000)0.5 | 402 | 120,000 | (120,000/400,000)0.3 or 30% | (200,000 x 0.3)60,000 | (60,000/120,000)0.5 | 403 | 90,000 | (90,000/400,000)0.225 or 22.5% |
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6 | -1.66667 |

| sales value | proportion | cost allocation | cost/unit | amount sold | 401 | 40,000 | 0.153256705 | 30651.341 | 0.30651341 | 100,000 | 402 | 84,000 | 0.32183908 | 64367.81609 | 0.459770115 | 140,000 | 403 | 70,000 | 0.268199234 | 53639.84674 | 0.536398467 | 100,000 | 404 | 32,000 | 0.122605364 | 24521.0728 | 0.61302682 | 40,000 | 405 | 20,000 | 0.076628352 | 15325.6705 | 0.766283525 | 20,000 | seconds | 15000 | 0.057471264 | 11494.25287 | 0.114942529 | 100,000 | | 261,000 | | 200,000 | | |

| 401 | 402 | 403 | 404 | 405 | seconds | Revenue | 40,000 | 84,000 | 70,000 | 32,000 | 20,000 | 15000 | Costs | 30651.34 | 64367.82 | 53639.85 | 24521.07 | 15325.67 | 11494.25 | Profit | 9,349 | 19,632 | 16,360 | 7,479 | 4,674 | 3,506 | GM% | 0.233716 | 0.233716 | 0.233716 | 0.233716 | 0.233716 | 0.233716 |

3(a)(i)
Revenue = 6,000 x 0.4 = 2,400
If we fill the order with 402’s
Cost of 401’s – we have 3,000 in inventory so 3,000 x 0.4 = 1,200
Plus fill the rest of the order with 402,s – 3,000 x 0.4 = 1,200
Total Cost = 1,200 + 1,200 = 2,400
Profit(Loss) = 2,400 – 2,400 = 0
Or if we produce more 401’s instead
Revenue is unchanged = 2,400
Cost of 401’s = 6,000 x 0.4 = 2,400
Profit(Loss) = 2,400 – 2,400 = 0
3(a)(ii)
Revenue is unchanged = 2,400
Cost of 3,000 401’s = 3000 x 0.31 = 930
Cost of 3,000 402’s = 3000 x 0.46 = 1380
Total Cost = 2,310
Profit (Loss) = 2,400 – 2,310 = 90
Or if we produce more 401’s
Revenue is unchanged = 2,400
Cost of 6,000

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