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BPP Practice & Revision Kit 8b.8 page 66

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › BPP Practice & Revision Kit 8b.8 page 66

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
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  • Author
    Posts
  • September 6, 2018 at 10:08 pm #471969
    hanjingjing828
    Member
    • Topics: 3
    • Replies: 2
    • ☆

    Hi John,
    Please can you help me with this question:
    Two joint products A and B are produced in a process. Data for the process for the last period are as follows:
    Product A B
    Tonnes Tonnes
    Sales 480 320
    Production 600 400
    Common production costs in the period were $12,000. There was no opening inventory. Both products had a gross profit margin of 40%. Common production costs were apportioned on a physical basis.
    What was the gross profit for product A in the period?
    $2,304; $2,880; $3,840; $4,800

    BPP shows the answer is $3,840. My calculation is $4,800 which is shown below:
    12,000 x (600/1000) = 7200 (production cost of A);
    Equation: sales value x 0.4= profit; sales value x 0.6= production cost.
    Therefore, sales value= 7200/0.6; profit= (7200/0.6)x 0.4= 4800
    Why do we need to match production cost against sales? 7200x 480/600= 5760; 5760x 40/60= 3840. Just can’t get my head around it.

    Many Thanks

    September 7, 2018 at 5:27 pm #472135
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54702
    • ☆☆☆☆☆

    I explain in my free lectures why it is that we need to use the sales value of the production.

    Please watch the lectures – they are a complete free course and cover everything needed to be able to pass the exam well.

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