Question 1: Chocolate Ltd

Chocolate (Pty) Ltd uses cocoa beans from Ecuador. After roasting the shells are
separated from the inside of the beans called nibs. The nibs are then further processed
resulting in two joint products. Cocoa powder and chocolate bars. The shells are milled
and sold to cattle farmers as supplement to cattle feed. The income from the by-product
will be reflected as other income.

Information pertaining the production and sales for the year ending 31 October 20xx was
as follows:

Joint cost R1,000,000

Cocoa Chocolate
Cattle feed
Powder bars
Output kg 3125 9375 2000
Selling price/kg R50 R200 R5
Total separable cost R103,125
Opening inventory 150 200
Closing inventory 800 1500

Cocoa powder can be sold at split-off point while chocolate bars must be
further processed before Chocolate (Pty) Ltd can sell them.

REQUIRED:

a) Allocate the joint costs to the joint products according to the:

i) Physical unit method
ii) Market value at split-off point
b) Calculate the gross profit and gross profit %, for cocoa powder, if the
market value at split-off point is used to allocate joint costs.

Cocoa Powder Chocolate bars

Sales =50x 2475 R123,750 = 200 x 8075 R1,615,000
Cost of Sales R63,360 R881,252
Opening balance =150 X 25.93 R3,840 =200 X 109.02 R21,827
Production = 3125 x 25.93 R80,000 =9375 x 109.02 R1,023,125
Closing balance =800 X 25.93 R20,480 =1500 X 109.02 R163,700
Gross Profit R60,390 R1,451,300
 Units sold = Opening balance + Production - Closing balance

1 Flow of units per unit:

Cocoa Powder Chocolate bars

Opening balance 150

Production 3125
Closing balance 800
Units sold 2475

(a) Allocation of joint cost using Physical unit method:

Cocoa Powder Chocolate bars

`
Production 3125
Basis 3125/12500 25% 9375/12500
Total joint cost R1,000,000.00
Joint cost per product 1000000 x 25% R250,000.00 1000000 X 75%
Joint cost for 1 unit of the
product =250000/3125 R80.00 =750000/9375
Separable cost for 1 unit R0.00 =103125/9375
Total jost for 1 unit of
the product R80.00

(b) Allocation of joint cost using Market value @ SOP:

Cocoa Powder Chocolate bars

Actual SP/u R50.00
Separable cost for 1 unit R0.00 =103125/9375
SP/u @ SOP R50.00 =200 - 11
Production 3125
MV @ SOP =50 x 3125 R156,250.00 =189*9375
Basis =156250/1928125 8% =1771875/1928125
Total joint cost R1,000,000.00
Joint cost per product =8% x 1000000 R80,000.00 =92% x 1000000
Joint cost for 1 unit of the
product 81037.28 / 3125 R25.60 918 962.72/9375
Separable cost for 1 unit R0.00
Total jost for 1 unit of
the product R25.60
Chocolate bars

200
9375
1500
8075

Chocolate bars Total

9375 12500
75%

R750,000.00

R80.00
R11.00

R91.00

Chocolate bars Total

R200.00
R11.00
R189.00
9375
R1,771,875.00 1,928,125.00
92%

R920,000.00

R98.13
 R11.00

R109.13
Question 2: Plastic Ltd

Plastic Ltd is a plastic processing company which uses a FIFO inventory valuation
system. It produces different strengths of plastics for industrial use. The company
produce two joint plastic products using the same process, namely, PLA plastic and
ABS plastic and a by-product named ZZZ.

PLA Plastic ABS Plastic ZZZ

Opening inventory 5000 3000
Units sold 42000 20500
Production 40000 20000 1000
Separable cost R20.00
SP/u R300.00 R330.00 R10.00

The following joint costs were incurred during the month: 10000
Direct material R4,000,000.00
Direct labour R2,000,000.00
Manufacturing Overheads R1,500,000.00

Total joint cost

R7,500,000.00 -10000 7,490,000.00
All percentages must be rounded off to the nearest percentage.

The income of the by-product must be used to lower the total joint cost.

Required:

1 Allocate the joint cost to the joints using:

(a) Physical unit method

(b) Relative Market value at split off point (SOP)
Calculate the total Gross Profit for both products if the joint costs are allocated according to physical unit
2
method.
Sales - Cost of Sales = Gross Profit

PLA Plastic ABS Plastic

Sales =300 x 42000 R12,600,000 =330*20500
Cost of Sales =42000*125,46 R5,269,320 =20500*143,59
Opening balance =5000*125,46 R627,300 =3000*143,59

R5,018,400
Production =40000*125,46 =20000*143,59
Closing balance -3000*125,46 -R376,380 -2500*143,59
Gross Profit R7,330,680
 Units sold = Opening balance + Production - Closing balance

1 Flow of units per unit:

PLA Plastic
Opening balance 5000
Production 40000
Closing balance =42000-5000-40000 -3000
Units sold 42000

(a) Allocation of joint cost using Physical unit method:

PLA Plastic

`40000/60000 `20000/60000
Production 40000

Basis 67%
Total joint cost R7,490,000.00

`𝑅5025000/40000 `2475000/2000
Joint cost per product = 7490000 X 67% R5,018,300.00

Joint cost for 1 unit of the

product R125.46
Separable cost for 1 unit R0.00
Total jost for 1 unit of
the product R125.46

(b) Allocation of joint cost using Market value @ SOP:

ed according to physical unit

PLA Plastic

Actual SP/u R300.00

ABS Plastic Separable cost for 1 unit R0.00

R6,765,000 SP/u @ SOP R300.00
R2,943,492 Production 40000

`(12 000000)/18200000
R430,755 MV @ SOP R12,000,000.00

R2,871,700
Basis 66%
-R358,962 Total joint cost R7,490,000.00
R3,821,508 Joint cost per product = 7490000 X 67% R4,943,400.00
Joint cost for 1 unit of the `𝑅4943400/40000 `2546600/20000
product R123.59
Separable cost for 1 unit R0.00
Total jost for 1 unit of
the product R123.59
 ABS Plastic
3000
20000
=20500-3000-20 -2500
20500

ABS Plastic Total

`20000/60000
20000 60000

33% 100%
R7,490,000.00 =7500000 - (10 X1000)

`2475000/20000
=74900000*33% R2,471,700.00 R7,490,000.00

R123.59
R20.00

R143.58

ABS Plastic Total

R330.00

R20.00
R310.00
20000 60000

`(6 200
R6,200,000.00 18,200,000.00

000)/18200000
34% 100%
R7,490,000.00 =7500000 - (10 X1000)
=7490000*33% R2,546,600.00 R7,490,000.00
`2546600/20000
R127.33
R20.00

R147.33
 Question 4: Bright Water Ltd

Bright Water Ltd produces two types of sparkling bottled water.

During The following joint costs were incurred during the joint
production process:

Cost
Direct material R125,000.00
Direct labour R75,000.00
R300,000.00
Manufacturing
Overheads R100,000.00
The following inventory were recorded:
Flavoured water Plain water
Opening Inventory 6000 1000
Closing Inventory 0 4000
Separable cost R210,000.00
SP/u R20.00 R15.00
Production 60000 40000

The company uses a FIFO inventory valuation system. All

percentages must be rounded off to the nearest percentage.

Required:

1 Allocate the joint cost to the joint products using:

(a) Physical unit method

(b) Relative Market value at split off point

Calculate the total Gross Profit for Plain water if the joint costs are
2
allocated according to relative market value at split off point.

Sales - Cost of Sales = Gross Profit

Sales - (units sold x total cost/unit)
Flavoured water Plain water
Sales =66000 * 20 R1,320,000 =37000 * 15
Cost of Sales =66000 *6,60 R435,600 =37000 * 2,85
R39,600
Opening balance =6000 * 6,60 =1000 * 2,85
Production =60000 * 6,60 R396,000 =40000 * 2,85
Closing balance = 0 * 6,60 R0 =4000 * 2,85
Gross Profit R884,400
Opening balance 6000

Production 60000

Closing balance 0
Units sold 66000
 Units sold = Opening balance + Production - Closing balance

1 Flow of units per unit:

Flavoured water Plain water

Opening balance 6000

Production 60000
Closing balance 0
Units sold 66000

(a) Allocation of joint cost using Physical unit method:

Flavoured water Plain water

`60000/100000 `40000/(100 000)

Production 60000

Basis 60%
Total joint cost R300,000.00

Joint cost per

`𝑅180000/60000 `120000/40000
product = 300000 X 60% R180,000.00 =300000*40%

Joint cost for 1 unit

of the product R3.00

Separable cost for 1 unit R3.50

Total jost for 1 unit

of the product R6.50

(b) Allocation of joint cost using Market value @ SOP:

Plain water
R555,000 Flavoured water Plain water
R105,450 Actual SP/u R20.00
Separable cost for 1
R2,850 R3.50
unit
R114,000 SP/u @ SOP R16.50
-R11,400 Production 60000
R449,550 MV @ SOP R990,000.00
 `990000/1590000 `( 500000)/1590000

Basis 62%
1000 Total joint cost R300,000.00

Joint cost per

`𝑅186000/60000 `114000/40000
40000 product = 130100 X 58% R186,000.00 =130100*42%
Joint cost for 1 unit
-4000 of the product R3.10
37000 Separable cost for 1 unit R3.50
Total jost for 1 unit
of the product R6.60
 Plain water

1000
40000
-4000
37000

Plain water Total

40000 100000

40% 100%
0

R120,000.00 R300,000.00

R3.00

R0.00

R3.00

Plain water Total

R15.00
R0.00
R15.00
40000 100000
R600,000.00 1,590,000.00
000)/1590000

38% 100%
0

R114,000.00 R300,000.00

R2.85
R0.00

R2.85
Question 6: LRP Fuel

LRP Petrol and Diesel are derived from a joint process where crude oil is refined.
The following information relates to the production for November 2020.

During November 10 000 litres of LRP Petrol and 5 000 litres of Diesel was
produced. 8 100 litres of LRP Petrol and 3 150 litres of Diesel were sold. In the
refining process joint cost of R64 000 was accumulated. Both products need further
processing. The separable costs for LRP Petrol amounted to R25 000 and the
separable costs for Diesel amounted to R7 500. LRP Petrol is sold for R17.20 per
litre and Diesel for R16.50 per litre.

There was no opening inventory at the beginning of November 2020.

LRP Petrol Diesel
Production 10000 5000
Sold 8100 3150
Joint cost R64,000.00
Separable cost R25,000.00 R7,500.00
SP/u R17.20 R16.50

Required:
1 Allocate the joint costs to the two products using

a) Physical units

b) Relative market value at split off point

Calculate the profit for LPR Petrol if we use the Relative
2 market value to allocate the joint cost.

Sales - Cost of Sales = Gross Profit

Sales - (units sold x total cost/unit)

LRP Petrol Diesel

Sales =8100*17.20 R139,320 =3150*16.50

Cost of Sales =8100*6.72 R54,432 =3150*5.85
Opening balance =0*6.72 R0 =0*5.85)
Production =10000*6.72 R67,200 =5000*5.85
Closing balance =1500*6.72 -R12,768 =1850*5.85

Gross Profit R84,888

Flow of units per unit:

LRP Petrol Diesel

Opening balance 0

Production 10000

Closing balance =8100-10000 -1900 =2150-5000

Units sold 8100
 Units sold = Opening balance + Production - Closing balance

1 Flow of units per unit:

LRP Petrol

Opening balance 0
Production 10000
Closing balance =8100-10000 -1900
Units sold 8100

(a) Allocation of joint cost using Physical unit method:

LRP Petrol

`
5000/15000
Production 10000
10000/15000
Basis 67%
Total joint cost R64,000.00
Joint cost per
product =64000 * 67% R42,880.00

42880/10000
Joint cost for 1 unit
of the product R4.29

Separable cost for 25000/10000

1 unit R2.50
Total jost for 1
Diesel unit of the
product R6.79
R51,975
R18,428 (b) Allocation of joint cost using Market value @ SOP:
R0
R29,250 LRP Petrol
-R10,823 Actual SP/u R17.20
Separable cost for
R2.50
R33,548 1 unit
 SP/u @ SOP R14.70
Production 10000
R147,000.00
147000/222000
MV @ SOP

Basis 66%
0 Total joint cost R64,000.00
Joint cost per
5000 product =64000*66% R42,240.00
Joint cost for 1 unit 42240/10000
-1850 of the product R4.22
3150 Separable cost for 1 unit R2.50
Total jost for 1
unit of the
product R6.72
ing balance

Diesel

0
5000
=2150-5000 -1850
3150

Diesel Total

5000/15000
5000 15000

33% 100%
R64,000.00

=64000 * 33% R21,120.00 R64,000.00

21120/5000
R4.22
7500/5000
R1.50

R5.72

Diesel Total
R16.50
R1.50
 R15.00
5000 15000

75000/220000
R75,000.00 222,000.00

34% 100%
R64,000.00

=64000*34% R21,760.00 R64,000.00

21760/5000
R4.35
R1.50

R5.85