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Session # 7: Lilac Flour Mills: Joint Product and By-Product Costing

1. Lilac Flour Mills processes 36 tons of wheat per day into various products including 60% white flour, 10% suji, 10% wholemeal flour, and 20% bran. The company has a stockpile of 2,000 tons of bran valued at Rs. 37,32,000. 2. Offers have been made to purchase the stored bran, with prices ranging from Rs. 1,000 to Rs. 1,350 per ton, with the most recent offer being Rs. 1,140 per ton. 3. Lilac's policy is not to sell any product below its full production cost. Exhibits provide calculations of production costs for each product using different allocation methods to

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148 views8 pages

Session # 7: Lilac Flour Mills: Joint Product and By-Product Costing

1. Lilac Flour Mills processes 36 tons of wheat per day into various products including 60% white flour, 10% suji, 10% wholemeal flour, and 20% bran. The company has a stockpile of 2,000 tons of bran valued at Rs. 37,32,000. 2. Offers have been made to purchase the stored bran, with prices ranging from Rs. 1,000 to Rs. 1,350 per ton, with the most recent offer being Rs. 1,140 per ton. 3. Lilac's policy is not to sell any product below its full production cost. Exhibits provide calculations of production costs for each product using different allocation methods to

Uploaded by

PRITEE
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Session # 7: Lilac Flour Mills

Joint product and


By-product costing
2,000 tons of Bran,
Stock of Bran accumulating
Value: Rs 37,32,000

Range of price/ ton: Rs 1,000


Offers for purchase of Bran
to Rs 1,350, recent : Rs 1,140

Problem Lilac’s policy


Not to sell any product at

Statement a price below full cost

60% White flour, 10%


Average yield from a ton of
Suji, 10% Wholemeal
wheat
flour, 20% Bran

Bran percentage
Efforts
minimum
Per day processing
36 tons of wheat

Bran yield
Bran 0.2 tons of Bran per ton wheat
Production
Daily Bran production
7.2 tons
In stock
2000 ton of Bran @ Rs. 1,866/ton
Customers

White flour, suji, and Bran


wholemeal flour

1. Direct household consumers Cattle feed by livestock


breeding centers
2. Industrial units
Or
Biscuit manufacturers
Bread bakeries Process further to extract
wheat bran oil
Exhibit II:
Calculation of average unit product cost based on production quantities

Monthly input of wheat= 36 Tons per day for 25 days =900 T


Qty. Prod Sep. Total P/L P/L on Total
Product J. C. allocated JC /T S. P./T
tons in % Cost/T cost/T per T Prod.

White Flour 540 60 999,000 1850 78 1,928 2,100 172 92,880

Suji 90 10 166,500 1850 84 1,934 2,480 546 49,140


Wholemeal
Flour
90 10 166,500 1850 34 1,884 2,000 116 10,440

Bran 180 20 333,000 1850 16 1,866 1,140 -726 -130,680

  900 100 1,665,000 1,850         21,780


Exhibit III: Calculation of average unit product cost based on Relative
Market Sales Value
Monthly input of wheat= 36 T per day for 25 days =900 T
% of Total Sep. P&L
Product Qty. S. P./T Net Sales J.C. allocated J.C./T T C /T Total P/L
Sales Cost/T /T
White
Flour
540 2,100 1,134,000 65.08 1,083,626 2,007 78 2,085 15 8,254
Suji 90 2,480 223,200 12.81 213,285 2,370 84 2,454 26 2,355
Wholemeal
Flour
90 2,000 180,000 10.33 172,004 1,911 34 1,945 55 4,936
Bran 180 1,140 205,200 11.78 196,085 1,089 16 1,105 35 6,235
  900   1,742,400 100.00 1,665,000         21,780
Selling price at split off point
Joint Cost Rs. lakh Separable
SP/ ton
costs
Wheat 15.84
Other Joint costs 0.81
60%: White flour Rs 78 Rs 2,100

16.65
10%: Suji Rs 84 Rs 2,480

10%: Wholemeal
flour Rs 34 Rs 2,000

20%: Bran Rs 16 Rs 1,140

A B C
Before Split-off After processing
processing
Calculation of average unit product cost
based on Relative Market Sales Values before split off point
Monthly input of wheat= 36 T per day for 25 days =900T
Sep.
Market NRV at P&L
Product Qty cost total value % of t v J.C allocated J. C /T TC Total P/L
S.P./T split off /T
/T
  Tons  A  B  A-B=C              
White
Flour
540 2100 78 2,022 1,091,880 64.73 1,077,781 1,996 2,074 26 14,099
Suji 90 2480 84 2,396 215,640 12.78 212,856 2,365 2,449 31 2,784
Wholemeal
Flour
90 2000 34 1,966 176,940 10.49 174,655 1,941 1,975 25 2,285
Bran 180 1140 16 1,124 202,320 11.99 199,708 1,109 1,125 15 2,612
  900       1,686,780 100 1,665,000       21,780

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