A company processes raw material into Products R, B, T and D. Products R, B and T are joint products and D is classified as a by-product. In process 1, 50 000 kg of material will be processed at a cost of R220 600 worth of material, R40 500 labour and R24 500 overheads. After the basic processing in process 1, thirty percent of the input is transferred to process B. In Process B additional costs of R25 400 are incurred and product B (from process B) can then be sold for R28 per kg. They transfer 60% of the original material input (from process 1) to process 2 and then the remainder to Process D. The products in process D are considered a by-product (By-product D) and have a sales price of R6 per kilogram. The cost involved with the selling of the by-product is R7 000 in total. The business account for this by crediting the net market value of by-products produced to the general production costs. In process 2 the materials processed further at a cost of R21 200. They then transfer 60% of the material in process 2 to process R where additional processing is done at R62 400. They can sell Product R (from process R) for R35 per kilogram. They transfer the remainder of the materials of process 2 to process T where they incur additional costs of R12 800. Product T (from Process T) has a sales value of R29 per kilogram. 3 Calculate the total production cost of every product type.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A company processes raw material into Products R, B, T and D. Products R, B and T are joint products and D is classified as a by-product. In process 1, 50 000 kg of material will be processed at a cost of R220 600 worth of material, R40 500 labour and R24 500 overheads. After the basic processing in process 1, thirty percent of the input is transferred to process B. In Process B additional costs of R25 400 are incurred and product B (from process B) can then be sold for R28 per kg. They transfer 60% of the original material input (from process 1) to process 2 and then the remainder to Process D. The products in process D are considered a by-product (By-product D) and have a sales price of R6 per kilogram. The cost involved with the selling of the by-product is R7 000 in total. The business account for this by crediting the net market value of by-products produced to the general production costs. In process 2 the materials processed further at a cost of R21 200. They then transfer 60% of the material in process 2 to process R where additional processing is done at R62 400. They can sell Product R (from process R) for R35 per kilogram. They transfer the remainder of the materials of process 2 to process T where they incur additional costs of R12 800. Product T (from Process T) has a sales value of R29 per kilogram. 3 Calculate the total production cost of every product type.

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