Reference no: EM13307392

Question 1

Jumbo Giant Limited manufactures three products, namely, Milk, Yoghurt and Ice-cream.

The initial joint cost of production is $600,000 for the year. This cost results in an output of 2,000,000 litres. Details relating to the 3 joint products are given below:

	Milk	Yoghurt	Ice-cream
Quantities at split off point	1,000,000 litres	400,000 litres	600,000 litres
Sales price per litre at split off point	$ 1.00 per litre	$ 2.00 per litre	$ 3.00 per litre
Separable cost	$ 0.50 per litre	$ 1.25 per litre	$ 1.50 per litre
Sales price of ultimate product	$ 5.50 per litre	$ 4.00 per litre	$ 9.00 per litre

Required: 1. Allocate the joint cost between Milk, Yoghurt and Ice Cream using a) The Physical Method. b) The Relative Sales Value Method. Round percentage to 2 decimal places. c) Net Realisable Value Method. Round percentage to 2 decimal places.

2. Jumbo Giant Limited has a request from a prospective customer to further process all its Ice Cream production into Gourmet Ice Cream which will then be bought by the customer for $12.00 per litre. This will increase the separable costs of ice cream per litre to $2.60. Would you advise the company to accept the offer? Why or why not?

Question 2

Mighty Mouse Limited estimates the following information for October 2014:

Sales  (Units)	22,000
Inventory -       October 2014	9,000
Inventory - 31st October 2014	7,500

The company's inventory policy requires ending inventory to be equal to 25% of the prior month's sales.

The company predicts sales to increase by 5% in November. December is a slow month and sales are estimated at 70% of November sales.

Attachment:- Management Accounting assignment.xps