Question 1
Jumbo Giant Limited manufactures three products, namely, Milk, Yoghurt and Ice-cream.
The initial joint cost of production is $600,000 for the year. This cost results in an output of 2,000,000 litres. Details relating to the 3 joint products are given below:
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Milk
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Yoghurt
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Ice-cream
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Quantities at split off point
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1,000,000 litres
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400,000 litres
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600,000 litres
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Sales price per litre at split off point
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$ 1.00 per litre
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$ 2.00 per litre
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$ 3.00 per litre
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Separable cost
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$ 0.50 per litre
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$ 1.25 per litre
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$ 1.50 per litre
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Sales price of ultimate product
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$ 5.50 per litre
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$ 4.00 per litre
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$ 9.00 per litre
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Required:
1. Allocate the joint cost between Milk, Yoghurt and Ice Cream using
a) The Physical Method.
b) The Relative Sales Value Method. Round percentage to 2 decimal places.
c) Net Realisable Value Method. Round percentage to 2 decimal places.
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2. Jumbo Giant Limited has a request from a prospective customer to further process all its Ice Cream production into Gourmet Ice Cream which will then be bought by the customer for $12.00 per litre. This will increase the separable costs of ice cream per litre to $2.60. Would you advise the company to accept the offer? Why or why not?
Question 2
Mighty Mouse Limited estimates the following information for October 2014:
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Sales (Units)
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22,000
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Inventory - October 2014
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9,000
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Inventory - 31st October 2014
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7,500
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The company's inventory policy requires ending inventory to be equal to 25% of the prior month's sales.
The company predicts sales to increase by 5% in November. December is a slow month and sales are estimated at 70% of November sales.
Attachment:- Management Accounting assignment.xps