It depends on whether the question wants the cost when it leaves the process or when it is fully finished (i.e. after the further processing). Almost certainly the question will want the cost when it is fully finished.

If we apportion to sales value. Do we use the production units figure or sold units figure. I am confused as I assumed it would be sold Unit. But on the revision tool kit I have one question it uses the production unit to apportion the joint cost. Would really appreciate your explanation on why it would be used. Many thanks in advance.

We use the selling price of the units produced (I do stress this in my lecture). The reason is that ultimately all of the production will be sold – whether it is sold in the current period or remains in inventory to be sold in the following period.

1) why you multiply 1000 and 2000 kg with their selling price? you can direct do this: 1000 * 7200/3000 to get the share of product A & B. 2) can you explain again why market value basis is not using instead of net realizable value however the question is same as eg. 2, only further process cost is given extra? 3) if examiner ask the cost per kg so for product A & B the cost/kg is 3.16 and 2.02 respectively or 7.96 and 4.22 respectively. 4) there is no production and sales revenue method as in MA2?

1. In example 2 we are apportioning the joint costs in proportion to the sales value of the production, because that is the method that the question asks to be used. 2. In example 3 we need the value at the date the products leave the process, which is less than the final selling price because of the cost of further processing. 3. The costs when leaving the process are 3.16 and 2.02. The final costs when ready for sale are 7.96 and 4.22. Exam questions will probably ask for the second, but it depends on the wording of the question. 4. The methods are the same as those in MA2 – the unit cost approach is based on the production, the market vale approach is based on sales value.

sir i am not refering to a textbook.. are your notes enough for me to pass in the managment accounting paper… also you are a really good teacher im planning to complete the enitre portion within 10 days

The notes and lectures together cover everything needed to be able to pass the exam well. However it is important that you buy a Revision Kit from one of the ACCA approved publishers because they contain lots of exam standard questions to practice (and practice is vital to passing the exam).

I am doing the practices test of finding the cost of the value of the closing inventory of product X Total Joint costs $ 384,000 Further processing cost (product H) $ 159,600 Using the Joint cost apportioned to H = 228,000 sales / 640,000 total sales x cost $384000 = $136,800 Total Product cost ($136,800 + 159,600) = $296,400 ** Closing inventory values of H = 28,000 / 228,000 X 296,400 = $36,400 My Question is where can i get this **28,000** from Really appreaciated if can get further helps from your side.

Example 2 During August, the following costs were incurred in a process: Materials (3,500 kg) $5,000 Labour and overheads $2,300 The production from the process was as follows: kg Product A 1,000 selling price $5 per kg Product B 2,000 selling price $2 per kg by-product X 500 scrap value $0.20 per kg Sales during the period were 800 kg of A and 1,500 kg of B. Calculate a cost per kg and profit per kg for A and B using the market value basis

my question is does the during the period the sales made of any use in solving it or just an additional info that we wont use?

There is no need to type out the whole question – I obviously have a copy of the lecture notes myself 🙂

The unit sales during the period are of no relevance in this question – we spread the joint costs over the sales value of the actual production. (The units are either then sold or are still in inventory at the end of the period). Even if (in the extreme) none of the units were sold during the period, we would still spread the joint costs in the same way – it would be needed for the valuation of the closing inventory.

Exam questions are more than likely to give both the production and the sales units – in order to test that you know that it is the sales value of production and not of the sales. Many will use the actual sales and get it wrong (because that will be one of the choices of answers available 🙂 )

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shram says

Excuse me, Sir,

In example 3.

The answer for cost per kg of A is $3.16 or $7.96.

How can we distinguish the answer will be $3.16 or $7.96 based on only cost per kg according to the question?

John Moffat says

It depends on whether the question wants the cost when it leaves the process or when it is fully finished (i.e. after the further processing).

Almost certainly the question will want the cost when it is fully finished.

shram says

That means the answer is $7.96.

I just want to make confirm the answer because in the notes

only half is done.

Thank you for giving valuable time to me.

John Moffat says

That is correct (and you are welcome 🙂 )

skhan10 says

If we apportion to sales value. Do we use the production units figure or sold units figure. I am confused as I assumed it would be sold

Unit. But on the revision tool kit I have one question it uses the production unit to apportion the joint cost. Would really appreciate your explanation on why it would be used. Many thanks in advance.

John Moffat says

We use the selling price of the units produced (I do stress this in my lecture). The reason is that ultimately all of the production will be sold – whether it is sold in the current period or remains in inventory to be sold in the following period.

ha12 says

1) why you multiply 1000 and 2000 kg with their selling price?

you can direct do this: 1000 * 7200/3000 to get the share of product A & B.

2) can you explain again why market value basis is not using instead of net realizable value

however the question is same as eg. 2, only further process cost is given extra?

3) if examiner ask the cost per kg so for product A & B the cost/kg is 3.16 and 2.02

respectively or 7.96 and 4.22 respectively.

4) there is no production and sales revenue method as in MA2?

John Moffat says

1. In example 2 we are apportioning the joint costs in proportion to the sales value of the production, because that is the method that the question asks to be used.

2. In example 3 we need the value at the date the products leave the process, which is less than the final selling price because of the cost of further processing.

3. The costs when leaving the process are 3.16 and 2.02. The final costs when ready for sale are 7.96 and 4.22. Exam questions will probably ask for the second, but it depends on the wording of the question.

4. The methods are the same as those in MA2 – the unit cost approach is based on the production, the market vale approach is based on sales value.

ha12 says

thanks alot

m900 says

sir i am not refering to a textbook.. are your notes enough for me to pass in the managment accounting paper… also you are a really good teacher im planning to complete the enitre portion within 10 days

John Moffat says

The notes and lectures together cover everything needed to be able to pass the exam well. However it is important that you buy a Revision Kit from one of the ACCA approved publishers because they contain lots of exam standard questions to practice (and practice is vital to passing the exam).

chelseahsu789 says

I am doing the practices test of finding the cost of the value of the closing inventory of product X

Total Joint costs $ 384,000

Further processing cost (product H) $ 159,600

Using the Joint cost apportioned to H = 228,000 sales / 640,000 total sales x cost $384000 = $136,800

Total Product cost ($136,800 + 159,600) = $296,400

** Closing inventory values of H = 28,000 / 228,000 X 296,400 = $36,400

My Question is where can i get this **28,000** from

Really appreaciated if can get further helps from your side.

nawal2000 says

Example 2

During August, the following costs were incurred in a process:

Materials (3,500 kg) $5,000

Labour and overheads $2,300

The production from the process was as follows:

kg

Product A 1,000 selling price $5 per kg

Product B 2,000 selling price $2 per kg

by-product X 500 scrap value $0.20 per kg

Sales during the period were 800 kg of A and 1,500 kg of B.

Calculate a cost per kg and profit per kg for A and B using the market value basis

my question is does the during the period the sales made of any use in solving it or just an additional info that we wont use?

John Moffat says

There is no need to type out the whole question – I obviously have a copy of the lecture notes myself 🙂

The unit sales during the period are of no relevance in this question – we spread the joint costs over the sales value of the actual production. (The units are either then sold or are still in inventory at the end of the period).

Even if (in the extreme) none of the units were sold during the period, we would still spread the joint costs in the same way – it would be needed for the valuation of the closing inventory.

Exam questions are more than likely to give both the production and the sales units – in order to test that you know that it is the sales value of production and not of the sales. Many will use the actual sales and get it wrong (because that will be one of the choices of answers available 🙂 )

konichan says

I was going to ask the same question above

I’ve got it. Your help is very helpful.

Thanks a lot, Sir.

John Moffat says

You are welcome 🙂