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July 21, 2022 at 7:20 pm
question 1) physical units method- to find cost per Kg: why did we not divide total joint cost ($7200) with total input (3500 kg) ?
John Moffat says
July 22, 2022 at 6:29 am
But I explain this in the lecture!
It is because X is a by-product. We take the total joint cost less the proceeds from the by-product and divide by the production (not the input!) of the two joint products.
January 17, 2022 at 1:59 am
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September 16, 2021 at 10:15 am
September 16, 2021 at 5:02 pm
Thank you 🙂
April 6, 2021 at 7:43 am
how did you get 9
April 6, 2021 at 8:05 am
I have no idea what ‘9’ you are referring to.
If you are meaning the $9,000 then it is the total sales value of the units actually produced. I show the workings in the lecture and the workings are printed in the lecture notes as well.
October 16, 2020 at 8:08 pm
I was expecting the combined profit of both methods of the product unit and market value would equal each other at the least. However it turns out if we use the product units methods, the total combined profit ends up higher (2.6-0.4 = $2.2) compared to market value profit (1+ 0.4 = $1.4) from your workings.
Also, I would like to ask – what did you mean by when you said “There is no market value when it leaves the joint process” @ around 19:40 onwards. I did not understand this statement.
October 17, 2020 at 8:01 am
Your figures are not the total combined profit. To get total profit you multiply by the number of kgs.
Market value is the price at which it can be sold.
March 12, 2021 at 7:53 pm
Greetings. I meant to ask why the final profit per unit using physical unit basis ($2-$0.4 = $2/kg) differs from the profit per unit calculated using market value basis ($1+ $0.4 = $1.4/kg) . There is a difference of $0.6 profit gap between the two methods. Is this not a flaw, and detrimental to decision making process ?
March 12, 2021 at 7:56 pm
In the end, I was thinking it might also affect the FA department, affecting lets say the overall dividends payable to the shareholders, due to the $0.6 profit gap between the two methods. You feedback will be appreciated.
March 13, 2021 at 7:47 am
No it is not a flaw at all. It is the total profit that is relevant and this will be the same whatever the method if there is no inventory. It will result in different inventory values and this will affect the profit in the short term, but in the long term the total profits will be the same. It is the total profit that determines the dividends. There is no other decision involved given that by the very nature of joint products they either produce both products or they produce neither – they cannot produce one without the other.
December 24, 2019 at 6:08 am
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?
December 24, 2019 at 7:13 am
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.
December 25, 2019 at 2:51 am
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.
December 25, 2019 at 1:26 pm
That is correct (and you are welcome 🙂 )
November 27, 2019 at 9:37 am
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.
November 27, 2019 at 2:21 pm
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.
November 25, 2019 at 7:23 am
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?
November 25, 2019 at 7:48 am
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.
November 26, 2019 at 5:40 am
October 29, 2019 at 6:07 pm
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
October 30, 2019 at 8:11 am
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).
August 12, 2019 at 2:01 pm
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.
February 16, 2019 at 7:41 pm
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?
February 17, 2019 at 9:58 am
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 🙂 )
March 27, 2020 at 3:03 am
I was going to ask the same question above I’ve got it. Your help is very helpful. Thanks a lot, Sir.
March 27, 2020 at 9:19 am
You are welcome 🙂
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