Alternati v e methods of joint- c o s t al l ocation, p r oduct-mix decisions.

Alternati v e methods of joint- c o s t al l ocation, p r oduct-mix decisions.

Schmidsendl GmbH buys crude vegetable oil. Refining this oil results in four products at the split-off point: A, B, C and D. Product C is fully processed at the split-off point.

Products A, B and D can be individually further refined into Super A, Super B and Super D.

In the most recent month (December), the output at the split-off point was:

Product A 300 000 litres Product B 100 000 litres Product C 50 000 litres Product D 50 000 litres

The joint costs of purchasing the crude vegetable oil and processing it were €100 000. Schmidsendl had no beginning or ending stocks. Sales of product C in December were

€50 000. Total output of products A, B and D was further refined and then sold. Data related to December are as follows:

Separable processing costs

to make super products Sales

Super A	€200 000	€300 000
Super B	80 000	100 000
Super D	90 000	120 000

Schmidsendl had the option of selling products A, B and D at the split-off point. This alter- native would have yielded the following sales for the December production:

Product A	€50 000
Product B	30 000
Product D	70 000

Required

1 What is the gross-margin percentage for each product sold in December, using the fol- lowing methods for allocating the €100 000 joint costs: (a) sales value at split-off, (b) physical measure, and (c) estimated NRV?

2 Could Schmidsendl have increased its December operating profit by making different decisions about the further refining of products A, B or D? Show the effect on operating profit of any changes you recommend.

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