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MAC3701 ASSIGNMENT 2 SEMESTER 2 OF 2023
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MAC3701 ASSIGNMENT 2 – SEMESTER 2 OF2023
(a) To: Management (Monate)
From: ……………………….
Date: ………………………..
Subject: ……………………
(i) There are four methods that can be used to allocate joint costs and they are
as follows:
➢ Physical measures method
Using this method, joint costs are allocated on the basis of the volume of
output of each joint product. This method is more appropriate when the
output is measured in the same way and selling prices are fairly similar.
Although all the joint products are being measured in kgs, this method
could only be appropriate if the selling prices of raw sugar at R11.50
(115 ÷ 10) per kg and molasses R9.60 (240 ÷ 25) per kg are considered
fairly similar.
➢ Market value at split off point method
Using this method, joint costs are allocated based on the estimated sales
value of the joint products at the split off point. This method can only be
appropriate if it is possible to determine the market values of the joint
products at the split off point. If the market value of the raw sugar can be
determined at the split off point, then this method can be appropriate.
➢ Net realizable method
Using this method, joint costs are allocated based on the final selling price
less the cost of further processing. Though this method results in the
valuation of inventory at lower than the net realizable value, it may result
in variations in the gross profit percentages of the various joint products.
➢ Constant gross profit percentage method
Using this method, joint costs are allocated in such a manner that all the
joint products will yield the same gross profit margin. The advantage is all
products will yield the same gross profit percentage.
FOR ACCADEMIC NEEDS CONTACT INFO@UNITUTORIALS.CO.ZA/0651609781
, (ii) Budgeted Statement of Profit or Loss for the 2023 financial year
Raw sugar Molasses Total
R R R
Sales [(2 500 * 1 000 ÷ 10 * 115); (3 800 * 28 750 000 36 480 000 65 230 000
1 000 ÷ 25 * 240)]
Less Cost of sales (21 453 297) (27 387 364) (48 840 661)
Opening inventory - - -
Add Production cost 22 242 778 28 021 598 50 264 376
Joint Production Costs 14 466 778 17 710 622 32 177 400
Packaging costs 1 296 000 979 776 2 275 776
Other variable manufacturing overheads 2 851 200 9 331 200 12 182 400
Further variable processing costs 3 628 800 - 3 628 800
Less Closing Inventory (789 481) (634 234) (1 423 715)
7 296 703 9 092 636 16 389 339
Less Other Variable Overheads (1 437 500) (1 824 000) (3 261 500)
Variable distribution costs [(28 750 000 * 1 437 500 1 824 000 3 261 500
5%); (36 480 000 * 5%)]
Contribution 5 859 203 7 268 636 13 127 839
Less Fixed Costs (1 540 000) (8 577 000)
Remuneration – Candy Ntsane 1 060 000 1 060 000
Remuneration – Sweet Ntsane 1 045 000
Fixed administration cost 5 272 000
Rent – Property AKA (60 000 * 12) 720 000
Rent – Property BNB (40 000 * 12) 480 000 480 000
Net Profit 4 319 203 7 268 636 4 550 839
Calculations
Total input = (800 * 12) = 9 600 𝑡𝑜𝑛𝑛𝑒𝑠
Total yield = (800 * 12 * 90%) = 8 640 𝑡𝑜𝑛𝑛𝑒𝑠
Breakdown of yield
Raw sugar = (8 640 * 30%) = 2 592 𝑡𝑜𝑛𝑛𝑒𝑠
Molasses = (8 640 * 45%) = 3 888 𝑡𝑜𝑛𝑛𝑒𝑠
Bagasse = (8 640 * 25%) = 2 160 𝑡𝑜𝑛𝑛𝑒𝑠
FOR ACCADEMIC NEEDS CONTACT INFO@UNITUTORIALS.CO.ZA/0651609781
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