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An Amul plant manufactures buttermilk and butter from milk. The joint process costs Rs. 1050,000...

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Accounting

An Amul plant manufactures buttermilk and butter from milk. The joint process costs Rs. 1050,000 and total 30,000 litres of milk is used. 1 litre of milk gives 100 gram of butter and 500 ml of butter milk. The selling price at this stage for butter is Rs. 50 per 100 gram and for butter milk is Rs. 20 per 500 ml. a) Allocate the process cost between butter and buttermilk using the sales value at split-off method. b) Amul gets an option to further process the 2 products (butter and buttermilk) into garlic butter spread and flavored buttermilk. The additional process for the two products will cost Rs. 200,000 and Rs. 300,000 respectively. The price for garlic butter spread is Rs. 75 per 100 gram and for flavored butter milk is Rs. 35 per 500 ml. Reallocate the process cost using the NRV method. c) What is the increase in profit from further processing the two products? Should the company process the products further?

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