- Question 2 Klover Pty Ltd Is The Parent Company Of Two Subsidiary Companies Pasture Pty Ltd And Flavoured Milk Pty 1 (84.19 KiB) Viewed 41 times
value at split-off point method (8 marks) andName 2 other methods
that can be used to allocate joint costs (2 marks).
Question 2 Klover (Pty) Ltd is the parent company of two subsidiary companies: Pasture (Pty) Ltd and Flavoured Milk (Pty) Ltd. The company operates in the dairy industry and has a holistic view on business. Each of these companies uses a different costing system as indicated in the respective parts below. PARTA Pasture (Pty) Ltd consists of multiple dairy farms and the nature of the business is to produce 3 products from a joint process using whole milk. The joint process produces butter, cheese and cream. The company uses a joint-and by-product costing system. During the process, approximately 20% of the milk is discarded in the form of whey, dairy sludge and wastewater. To prevent water pollution, the diary sludge and wastewater must be disposed of. It is estimated that it will cost the company R 260 000 in the 2021 financial year to safely dispose of this. The whey has an extremely high nutrient value and can be sold for R20 per kilogram after processing it further. Due to its delicate nature, further processing costs of the whey amounts to R5 per kilogram. The following is an estimate of the cost to be incurred for the 2021 financial year regarding the production of these 3 products: Direct material R 1 020 000 Direct labour R 840 000 Transportation of milk R370 000 Manufacturing overheads R 680 000 At the split-off point, one tonne of milk generates 250kg of butter, 150kg of cheese, 100kg of cream and 500kg of whey. At this point butter is sold for R120 per kilogram, cheese is sold for R80 per kilogram and cream is sold for R50 per kilogram. No further processing is done on the 3 joint products. Assume that the company had no opening or closing inventory.