The document describes a company that produces three products - X, Y, and Z - from an initial joint process costing $400,000. It provides the quantities produced of each product and their sales values both at the split-off point after the initial process and after possible further processing. It asks to calculate the apportionment of joint costs to each product at the split-off point and indicate how profits can be maximized with supporting figures. A second question provides cost and demand information for four liquid products - P, Q, R, and S - produced by another company and asks to determine the optimal production mix to maximize profits over three months given a labor hours constraint.

1. AC109 : Practice for in-class
Question 1
A company produces three main products, X, Y and Z from the same initial process. In
period 2, a process costing $400,000 produces the following quantities:
Product X 15,000 litres
Product Y 22,000 litres
Product Z 44,000 kilograms
Each product can be sold at the completion of the process as follows:
Sales value at split off point
Product X $10 per litre
Product Y $4 per litre
Product Z $10 per kilogram
Alternatively, further processing of each individual product can be undertaken to produce an
enhanced product as follows:
Subsequent processing costs Sales value after final process
Refined product X $14 per litre $20 per litre
Y $2 per litre $8 per litre
Z $6 per kilogram $16 per kilogram
Required:
Assuming further processing results in processing loss of 5% per each product line:
(a) Calculate the apportionment of joint process costs to products X,Y and Z at split off
point (24)
(b) Indicate by how much profits can be maximised. Use figures to support your answer
(26)
[Total marks:50]

2. Question2:Short termdecisionmaking
JK ltd manufactures four liquids namely P, Q, Rand S. The selling price and unit cost details
for these products are as follows:
P
$/litre
Q
$/litre
R
$/litre
S
$/litre
Selling price 100 110 120 120
Direct materials
Direct labour($6/hour)
Direct expenses
Variable overhead
Fixed overhead (note 1)
24
18
-
12
24
30
15
-
10
20
16
24
3
16
32
21
27
-
18
36
Profit 22 35 29 18
During the next three months, the number of direct labour hours is expected to be
limited to 1200.The same labour is used for all products. The Marketing Director has
identified the maximum demand for each of the four products as follows:
A -200 litres ; B- 150 litres ; C-100 litres and D-100 litres.
The maximum demand levels include the effect of a contract made between X ltd and
one of its customers, Y ltd to supply 8 litres each of P,Q, Rand S during the next
three months.
Required:
(i) Determine the optimum production mix for products P, Q,R and S in order to
maximise profits.
Calculate the profit that this would yield. Assume no stock is held at the beginning of the
three months which may be used to satisfy demand in this period.