Figure 6-8
James Ltd $\begin{array}{lr}\text { Direct materials } & £ 50,000 \\\text { Direct labour } & 20,000 \\\text { Overhead } & 40,000\end{array}$

question 13

Multiple Choice

Figure 6-8
James Ltd. produces three products in a joint process: A, B, and C. The joint costs are as follows: $\begin{array}{lr}\text { Direct materials } & £ 50,000 \\\text { Direct labour } & 20,000 \\\text { Overhead } & 40,000\end{array}$ The split-off values for A, B, and C are £80,000, £100,000, and £60,000, respectively. If management processes the three products beyond the split-off point, sales values for A, B, and C would increase to £150,000, £130,000, and £120,000, respectively. In order to process the products further, the company must incur separable costs of £14,000, £12,000, and £10,000 for products A, B, and C, respectively. James uses the sales-value-at-split-off method to allocate joint costs.
-Refer to Figure 6-8. Should James Ltd. process A further?

• A)Process further; profits will increase £56,000.
• B)Sell now.
• C)Process further; profits will increase £70,000.
• D)Process further; profits will increase £136,000.

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Definitions:

Estimated Bad Debts

Anticipated amounts that customers will not pay the company, typically recorded as an expense.

Realizable Value

The estimated amount that could be received from the sale of an asset in a normal transaction between willing parties.

Cash Discount

A reduction in invoice price given by a seller to a buyer in return for early payment, aimed at accelerating cash inflows.

Standard Practices

Established and widely accepted methods or procedures used in a field or industry.